fbpx

Type to search

SoftBank Shares Soar on Buyback After Alibaba ‘Blizzard’

SoftBank shares enjoyed the biggest daily rise in 11 months, lifting the group’s capitalisation above $100 billion. Trading volume was double the 30-day average


Softbank shares soarded on buyback
SoftBank is moving to exit from the boards of most of its listed portfolio companies, according to a source, who said the tech group expects it will face fewer regulatory issues. Photo: Reuters.

 

SoftBank Group Corp shares jumped 10.5% on Tuesday, the first trading session after the Japanese conglomerate said it would spend up to 1 trillion yen ($8.8 billion) buying back almost 15% of its shares.

The company announced the buyback, long speculated about by the market, after it revealed its quarterly earnings crashed to a loss amid a decline in the share prices of its portfolio companies and a regulatory ”blizzard” in China.

SoftBank’s shares closed at 6,808 yen in its biggest daily rise in 11 months, lifting the group’s market capitalisation above $100 billion. Tuesday’s trading volume was more than twice the 30-day average.

READ MORE: Softbank Shares Soar on Buyback After Alibaba ‘Blizzard’

The buyback is SoftBank’s second largest after a record 2.5 trillion yen buyback launched during the depths of the Covid-19 pandemic last year. Shares of the tech group quadrupled during that buyback, but have since fallen 40% from a peak in May.

“Our analysis of buyback history indicates that SBG stock performs (and outperforms indices or BABA) during buybacks,” wrote Jefferies analyst Atul Goyal in a note, referring to Alibaba, the group’s largest asset. SoftBank owns about a quarter of Alibaba’s shares.

The slide in the Chinese e-commerce giant’s shares and the broader regulatory backlash in China contributed to a $57 billion fall in SoftBank’s net assets to $187 billion, a metric that Chief Executive Masayoshi Son has said is the primary measure of SoftBank’s success.

 

Reuters

 

The repurchase period for the latest buyback runs to November 8 next year, with the group signalling the programme could take longer than the fast-paced purchases last year.

The buyback “is nice support, but it isn’t rocket fuel,” wrote LightStream Research analyst Mio Kato on the Smartkarma platform, adding “there are material downside risks if broader tech, especially unprofitable tech, falters.”

Speculation that SoftBank could launch a buyback has been raging for months as the discount – the gap between the value of its assets and its share price – has lingered to the frustration of executives and as investors push for repurchases.

READ MORE: Masayoshi Son Says SoftBank Hit By Alibaba ‘Blizzard’

Ongoing uncertainties include the prospect of gaining regulatory approval for the $40 billion sale of chip designer Arm to Nvidia.

Delays to the sale “may have given Softbank the flexibility to announce a buyback now with expectations of ramping up share purchases later,” Redex Research analyst Kirk Boodry wrote in a note.

SoftBank is ramping up investing via Vision Fund 2, which has $40 billion in committed capital from the group and Son himself, even as it winds down activity at trading arm SB Northstar.

“Even if the company manages its finances with a certain amount of discipline, share buybacks would likely erode the financial buffer if executed,” S&P Global Ratings analysts wrote in a note.

The conglomerate held more than 5 trillion yen in cash and cash equivalents at the end of September, an increase of 9% compared to six months earlier.

 

• Reuters with additional editing by Jim Pollard

 

ALSO SEE:

From E-Commerce to Education, China’s Season of Regulatory Crackdown

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

logo

AF China Bond