Investors pounce on Softbank shares after record $41bn buyback

Japanese tech investor Softbank seems to finally be giving its investors what they want after announcing up to $41bn in asset sales and a record share buyback to shore up its collapsing share price.

SoftBank Group Corp’s stocks jumped 20 percent on Tuesday, extending a run that began a day earlier after the conglomerate said on Monday afternoon that it would buy back up to 2 trillion yen ($18bn) worth of shares in addition to an up to 500-billion-yen ($4.53-bn) purchase announced earlier this month.

SoftBank shares ended Monday up 19 percent, hitting their daily limit.

“The market sent a strong message and SoftBank has heeded it,” Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma, told Bloomberg news agency after Monday’s announcement.

“What’s changed is that this will entail a meaningful sale of Alibaba stake with much of the proceeds going to shareholders, he added. “SoftBank has never done that before.”

The group’s shares have been hammered in recent months after significant bets on late-stage startups, led by Chief Executive Officer Masayoshi Son via SoftBank’s $100bn Vision fund, produced losses.

This forced a sell-down of core parts of its portfolio and buybacks – moves long sought by investors pushing for enhanced shareholder returns.

“We would have ideally preferred such an announcement from a position of strength and not because the (SoftBank) stock came under tremendous pressure,” Jefferies analyst Atul Goyal wrote in a note, upgrading his SoftBank stock rating to “buy”.

Selling down SoftBank’s stake in domestic wireless carrier SoftBank Corp to 50 percent could raise about $10bn while retaining control of the company, Goyal wrote.

SoftBank is planning to sell about $14bn of shares in Chinese e-commerce giant Alibaba Group Holding Ltd, sources told Bloomberg. 

Alibaba, which is listed in New York, is 25 percent owned by SoftBank, a stake currently worth approximately $120bn. Its shares have declined 17 percent in the year-to-date.

“A partial sale of SoftBank’s stake is likely, a person familiar with the matter told Reuters news agency, with shares likely to be sold into the open market rather than back to the company.

Alibaba buying back shares from SoftBank will not please its shareholders, according to a source. “You are only making Masa Son happy. SoftBank wants to sell urgently but Alibaba is not in such a rush,” the person said, who was not authorised to speak with media on the matter and so declined to be identified.

Alibaba declined to comment. SoftBank did not immediately respond to a request for comment.