Elliott Pushes SoftBank to Buy Back Shares After Taking Stake

(Bloomberg) — Elliott Management has built a sizable stake in SoftBank Group Corp. and is pushing the Japanese investment firm to launch a $15 billion buyback, according to people familiar with the matter.

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The US activist investor has amassed a stake worth more than $2 billion and engaged with SoftBank executives in recent months, the people said. Elliott is arguing that a share repurchase of that magnitude would help founder Masayoshi Son signal to the market his confidence in SoftBank. Its shares rose 4.6% in Tokyo.

It’s the second time Paul Singer’s firm has targeted SoftBank, once among the world’s biggest and most influential tech investors. Elliott had accumulated a roughly $3 billion stake in 2020, after which SoftBank sharply ramped up its pace of buybacks. Elliott later sold down much of its stake in the Tokyo-based company.

Representatives of SoftBank and Elliott declined to comment. The Financial Times first reported Elliott’s investment earlier Wednesday.

Elliott’s move — the latest in a string of Japanese deals for the firm — comes amid a resurgence in activist investor interest in the country. It also taking place just as SoftBank prepares to get more aggressive again in investments in AI and other fields, after a surge in the value of key assets including chip unit Arm Holdings Plc.

Arm’s ascent, and the boost it gives to the holding company’s net asset value, gives SoftBank less reason to conduct buybacks, said Bloomberg Intelligence analyst Marvin Lo. Investors may be more inclined to focus on SoftBank’s longterm strategy, rather than near-term returns, he said.

“SoftBank did not conduct share buybacks when the company was on a defense mode. Chances for it to do now might be small given that Masayoshi Son is ready for an all-in strategy on AI,” he said.

SoftBank’s stock had reached ¥9,000 a share before the Elliott news hit, far above the ¥5,000 to ¥7,000 range of the past two years.

Elliott is taking aim at SoftBank in part because of a wide gap between the firm’s market value and the net worth of its assets — something Son himself has repeatedly pointed out to argue that the company’s shares are undervalued. London-based senior portfolio manager Nabeel Bhanji, who has been instrumental in guiding Elliott’s investments in Tokyo, is managing the firm’s position.

“That headline number of $15 billion in buybacks will pull a lot of fast-money buyers in,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte. “They clearly mean business so this has the potential to gain traction.”

But Son is aiming to go on the offensive again after years of missteps at the Vision Fund, the investment group he set up to bet billions of dollars on startups. The fund is now steadily selling off and writing down assets in its portfolio as Son turns his focus to AI and semiconductors.

SoftBank has accumulated a cash pile of ¥6.2 trillion ($40 billion) at the end of March. Its loan-to-value ratio has dropped to 8.4%, near a record low and far below the company’s target of 25%. That is one of Son’s favorite metrics for determining whether the company is properly balancing risk and opportunity.

The company has plans for a good chunk of that capital. Son is seeking as much as $100 billion to bankroll a chip venture to compete with Nvidia Corp. and supply semiconductors essential for AI, Bloomberg News reported in February. The Japanese firm is also in talks to acquire British semiconductor startup Graphcore Ltd., Bloomberg reported.

“The company has room to invest up to $30 billion, assuming it keeps its loan-to-value ratio below 30%,” Lo said.

–With assistance from Winnie Hsu, Dinesh Nair and Momoka Yokoyama.

(Updates with details throughout and analyst commentary in the last two paragraphs)