SoftBank Unveils $3.4 Billion Buyback After Elliott’s Push

(Bloomberg) — SoftBank Group Corp. announced a buyback worth up to ¥500 billion ($3.4 billion), following a month of sharp selloffs and pressure from activist investor Elliott Investment Management to bolster its stock price.

Most Read from Bloomberg

The Tokyo-based technology investor plans to buy up to 6.8% of its free-floating outstanding shares in the year to August 7, 2025, according to a release Wednesday. The announcement comes after Elliott built a sizable stake in SoftBank this year and had pushed for a $15 billion buyback, people familiar with the matter said in June.

The outlay comes as founder Masayoshi Son has indicated he’s mobilizing resources for a large-scale investment push into AI. It also coincides with a correction in the markets as investors reevaluate how they price AI’s potential impact on earnings. SoftBank’s stock plunged Monday by its most since 1998. The shares recouped much of that loss on Tuesday and Wednesday, but SoftBank’s market value was still down more than $40 billion from a record high notched in July.

“Son-san has a history of big buybacks when the chips are down and this seems no exception,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore. “As always, devil is in the details, but it’s a positive that he is willing to throw so much into a buyback.”

Son has used buybacks in the past to bolster his share price, when he sees it as a valuable use of cash. During the Covid pandemic as shares slid, SoftBank spent about ¥4 trillion to repurchase its stock.

The buyback may ease some pressure to do something about shareholder returns, according to Astris Advisory’s Kirk Boodry. “A ¥500 billion buyback should be enough to generate some excitement even if it is relatively light versus previous programs and what activist investors would like to see,” he said. “It’s a manageable size alongside even an accelerated AI investment program.”

SoftBank on the same day reported a smaller net loss of ¥174.28 billion in the June quarter, compared with a loss of ¥477.62 billion a year ago. Solid earnings at chip unit Arm Holdings Plc helped counter continued losses on Vision Fund assets.

SoftBank remains saddled with hundreds of loss-making startups that remain on its flagship Vision Fund’s books. The majority of that portfolio comprises unlisted young companies, which are seeking to navigate a swiftly transforming tech landscape.

The Vision Fund segment tumbled to a loss of ¥204.3 billion from a profit of ¥61 billion, hurt by declines in the share prices of publicly-listed portfolio companies including AutoStore Holdings Ltd. and Symbotic Inc., as well as markdowns at unlisted startups SoftBank’s invested in.

The holding company, which owns big stakes in Japan’s No. 3 mobile carrier as well as chip designer Arm, has a large cash pile to deploy. As of the end of June, it had cash and cash equivalents of ¥5.5 trillion.

The company’s ability to raise further financing has soared thanks to Arm’s initial public offering last year, while earnings got a further boost from another sale of T-Mobile US Inc. shares to Deutsche Telekom AG as part of a 2020 deal.

Prior to the market turmoil of recent weeks, Son said he’s ready to swing for the fences. The billionaire is working on a plan to deploy some $100 billion into AI-related chips, Bloomberg reported in February. Last month, the company bought British semiconductor startup Graphcore Ltd. for an undisclosed sum. The Bristol-based startup designs semiconductors to run AI programs, but has struggled to gain traction, even as far larger rival Nvidia Corp. surged ahead.

Son is increasingly making bets through the SoftBank holding company rather than through the Vision Fund he set up seven years ago. Over the last few quarters, the Vision Fund has been selling down its assets while slowing its pace of investments. Instead, its team is increasingly advising the holding company of potential targets.

What Bloomberg Intelligence Says:

SoftBank Group’s share buyback program of up to ¥500 billion and increasing pressure on technology stocks could lead to weaker loan-to-value and less headroom to invest under its ratings. Holding company net debt, excluding prepaid forward contracts, increased slightly to $40 billion in fiscal 1Q, though Arm’s strong share price up to June may offset this. But the chip company’s shares are down around 30% since July, wiping $47 billion from SoftBank’s portfolio value.

-Sharon Chen

(Updates with analyst commentary and details from earnings announcement.)