SoftBank launches $4.4bn share buyback
Japanese telecoms group SoftBank has revealed plans for its biggest share buyback — a $4.4bn show of confidence that follows a steep fall in net profits and months of heavy declines in its share price.
In a move that took analysts by surprise and emerged on a day that the Nikkei 225 Average rallied more than 7 per cent, the mobile carrier said it would buy back as much as 14.2 per cent of its common stock.
SoftBank said that the timing of the buyback, which eclipses a Y120bn share repurchase announced in the summer of 2015 and follows a 28 per cent slide in the shares since the start of this year, was “optimal”.
The company said it would fund the buyback through a combination of cash-in-hand and the proceeds of asset sales — disposals that have not yet been disclosed but which analysts said were likely to focus on small, non-integral holdings rather than any reduction of SoftBank’s strategic stakes in Alibaba and Yahoo Japan.
SoftBank said it had not yet decided whether to cancel the shares it plans to buy back.
The announcement came just five days after SoftBank delivered its results for the final quarter 2015 — an opportunity taken by Masayoshi Son, SoftBank’s chief executive, to assure investors that his faltering $22bn wager on the heavily indebted US mobile carrier Sprint would pay off. Mr Son said last week that, contrary to market opinion, Sprint would become one of SoftBank’s “primary cash cows”.
Nathan Ramler, a telecoms analyst at Macquarie in Tokyo, said it was surprising that Mr Son had not announced the buybacks last week to accompany the reassurances on Sprint. But he said that SoftBank’s narrative was consistent.
“They did Y120bn of buybacks a few months ago and the stock has come down since then. They would have looked at the cash available and the cash flow and decided that this would send the clear signal the company thought its shares were good value last August at Y7,000 per share and are even better value now,” said Mr Ramler.
After the company’s results last week, analysts argued that the heavy sell-off of SoftBank shares — though part of a wider rout in Japanese stocks in 2016 — was overdone. In a note to clients, Nomura’s Daisaku Masuno calculated a sum-of-the-parts valuation of Y7,570 per share — more than 70 per cent higher than where the stock currently stands.
The move by SoftBank comes at the end of what was already a record year for share buybacks in Japan and echoes a Y500bn buyback announcement by its rival NTT DoCoMo two weeks ago.
Last November, Toyota said it would undertake as much as Y798bn of share buybacks and analysts estimate the total for the financial year ending March 31 could reach Y4.8tn. None, however, has matched SoftBank with a buyback affecting such a large slab of the outstanding shares.
SoftBank shares, which are down almost 40 per cent over the past 12 months, on Monday closed up 5.7 per cent at Y4,400.