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SoftBank

SoftBank shares tumble despite $4.7bn buyback

Boosting shareholder return responds to activist proposal but fails to stem sell-off

SoftBank CEO Masayoshi Son: The massive stock buyback will try to shore up the conglomerate's tumbling share price. (Photo by Ken Kobayashi)

TOKYO -- SoftBank Group on Friday announced a 500 billion yen ($4.7 billion) stock buyback program as it tries to halt its share price decline and quiet pressure from an activist investor.

SoftBank will buy up to 145 million shares, or 7% of its outstanding shares, it said in a filing shortly after trading began in Tokyo on Friday. The buyback program will start on Monday.

But the announcement did little to restore confidence amid panic selling across the globe. SoftBank shares closed 5% lower on Friday as Japanese stocks suffered their worst week since 2008.

SoftBank is also up against U.S. activist investor Elliott Management, which in early February unveiled a $2.5 billion stake in SoftBank. It is reportedly calling for share buybacks, board changes and more transparency at SoftBank's near $100 billion Vision Fund.

Masayoshi Son, SoftBank's CEO and its biggest shareholder, last month said Elliott's proposals are "in accordance with my thinking of conducting share buybacks if there is ample capital."

"Elliott will likely be disappointed that the [buyback] number isn't larger," said Chris Lane, an analyst at Sanford C. Bernstein. "But we think the amount is prudent given the current uncertainty regarding new investors for Vision Fund II."

SoftBank completed a 600 billion yen share buyback less than a year ago. The move temporarily boosted its stock price, which fell back after the company later in the year reported a large loss on its investment in U.S. office space provider WeWork. The fallout fueled concerns over the valuations of other Vision fund-backed companies.

SoftBank recently said it will borrow up to 500 billion yen from 16 domestic and foreign lenders by pledging a chunk of its mobile unit's shares as collateral. In addition to using cash on hand, SoftBank said it will consider new funding options to finance the buyback.

SoftBank stock has fallen more than 30% in the past month. The sharp decline has widened the "discount" between what Son calls shareholder value, or the value of the shares it owns, such as its more than $100 billion stake in Alibaba Group Holding.

The shareholder value per share was 10,847 yen as of Thursday compared to its stock price of 3,964 yen, according to the company's website.

But concerns loom about how the coronavirus crisis will impact portfolio companies. Alibaba's U.S.-listed shares fell 6.8% on Thursday. U.S. ride hailing company Uber Technologies, which has received $7.7 billion from the Vision Fund, suffered a 13.8% fall in its share price on the same day. That pulled Uber's shares to their lowest level since the company went public last year.

A buyback in the midst of a sharp decline in financial markets is a "credit negative," SMBC Nikko Securities wrote in a report.

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