In what could be interpreted as an attempt to protect the Japanese conglomerate from the impact of COVID-19, Softbank has announced it will sell assets to the value of JPY4.5 trillion ($41 billion).
Through open market transactions, privately negotiated transactions and tender offers the company plans to repurchase and retire a significant proportion of its shares. Combining this share buyback programme along with another which was announced on March 13, 45% of Softbank shares will be removed from the open market. This looks like a very attractive programme when you consider the performance of international markets amid the COVID-19 pandemic.
“This program will be the largest share buyback and will result in the largest increase in cash balance in the history of SBG, reflecting the firm and unwavering confidence we have in our business,” said Masayoshi Son, CEO of Softbank Group.
“This will allow us to strengthen our balance sheet while significantly reducing debt. Moreover, the monetization of assets represents less than 20 percent of the Company’s current asset value.”
Right now, the business has not said which assets will be divested, though it has its fingers dipped deep into plenty of pies around the world. Thanks to two multi-billion-dollar investment funds, CEO Masayoshi Son has been fuelling the growth of the digital economy for many years. However, the core business is of course telecommunications, and this would appear to be a sensible time to reinvest.
According to Softbank, shares in the telco are undervalued currently, trading at a 73% discount “to their intrinsic value”, the largest dip in the company’s history. Since this announcement, Softbank share price has risen 18.61% (at the time of writing).
What this small story does show is that those with money can benefit from any developments in society. Softbank is freeing up some assets to repurchase shares and wrestle back control of the organisation, as the fewer shares which are available for purchase, the more protected Softbank is from external influences, such as activist investors.