SoftBank's shares surge amid buy-back rumours

Japanese multinational holding company moves to raise buyout hurdle 

by Sam Nussey
SoftBank's shares surge amid buy-back rumours
Softbank chief executive Masayoshi Son.

SoftBank Group Corp's shares jumped by as much as 7% on Wednesday after it was reported that the group was considering buying back shares.

It’s thought the move is designed to boost CEO Masayoshi Son's stake so he can squeeze out remaining investors.

Son owns a quarter of SoftBank's shares and would need to lift his shareholding ratio to two-thirds to push out minority shareholders. 

UNDERVALUED

SoftBank's shares are seen as chronically undervalued by company executives, and debate around the benefits of a buyout intensified as they plunged to lows in March.

Record share buybacks and a string of asset sales have driven a 180% share price gain to two-decade highs since then, giving the group a market capitalisation of around $140 billion and raising the hurdle for a buyout. 

Management buyouts remain rare in Japan, where being listed is a mark of status for companies, and any move to take SoftBank private faces considerable internal opposition.

ASSET SALES

SoftBank's revised scheme would aim to buy back shares when the price dips rather than launching a formal buyout with the aim of limiting the premium paid, Bloomberg reported

The group spent $1.6 billion on buybacks in November, an increase from the previous month but less than half its July outlay.

The group has raised $80 billion through asset sales causing speculation about how Son, who is said to prefer buying over selling, will deploy the cash pile. 

"SoftBank has grown to what it is through an enthusiastic use of other people's money which would end with privatisation," said Kirk Boodry, analyst at Redex Research, adding a buyout would limit Son's freedom to invest elsewhere.

  • Reuters

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