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SoftBank has laid out plans to buy back up to ¥500bn ($3.4bn) of its own shares after a market rout that hammered Japanese stocks and following pressure from activist investors.
The Japanese conglomerate founded by Masayoshi Son said on Wednesday it would repurchase as much as 6.8 per cent of its shares as it unveiled a first-quarter loss of ¥174bn, or $1.2bn.
SoftBank’s buyback news comes two months after the Financial Times revealed that activist investor Elliott had rebuilt a stake of more than $2bn in the group and was pushing for a near-term $15bn capital return programme.
“We made our own decision after discussions at the board level,” Yoshimitsu Goto, SoftBank’s chief financial officer, told journalists on Wednesday after the buyback was made public. “We are not a company that makes decisions based on the influence of somebody else.”
It is not the first time SoftBank has used buybacks when shares have taken a beating. In 2020, it launched a ¥4.5tn programme to reassure shareholders in the face of the Covid-19 pandemic.
“They are very clear that they decided this on their own,” said Kirk Boodry, a SoftBank analyst at Astris Advisory in Tokyo. “They don’t want to give the impression that they were being pushed.”
He added: “I do think [that] what happens when you have Elliott coming into the picture, it makes everyone say your stock is cheap, why not buy it back . . . It gives a foundation to give anyone with stock a cause to have that chat with management.”
SoftBank narrowed its quarterly loss from the first three months of last year, according to Wednesday’s earnings report, but missed analyst expectations, according to LSEG data.
“It was well within the range of what we were expecting, particularly since there is such a margin for error due to one-off gains or losses,” said Boodry, who highlighted the volatile nature of the group’s tech-heavy Vision Funds.
Up until Wednesday’s buyback announcement, SoftBank had been saying that it would prioritise investments in artificial intelligence — ignoring the pressure from Elliott — as Son plots how to make his group relevant in what he believes is the next stage in humanity’s development.
But analysts had upped their bets for a buyback by Japanese groups including SoftBank after the Topix, Japan’s benchmark share index, fell about 9 per cent following the central bank’s surprise rate increase last week. SoftBank’s share price has dropped 33 per cent over the past month.
“This cliff plunge offers a great opportunity for Japan Inc to do sizeable buybacks,” said Atul Goyal, a Jefferies analyst, in a note to clients this week.
Elliott has argued that buybacks would boost return on equity and narrow the substantial discount between the value of SoftBank’s asset portfolio and its market capitalisation, according to people familiar with its stance. Elliott also believes that the group has the balance-sheet strength to return capital to investors and pursue AI deals at the same time.
As of June, SoftBank had cash or cash equivalents on hand of ¥5.5tn.
Son’s plan is in flux, say people familiar with the matter, but will be centred around UK chip designer Arm, which SoftBank listed in New York last year but of which it retained most of the shares.
SoftBank last month bought UK-based chipmaker Graphcore and in May led an investment of more than $1bn in UK self-driving car start-up Wayve, marking Europe’s largest AI deal. Both transactions went through SoftBank, rather than the Vision Funds.