Japanese billionaire Masayoshi Son has a plan to save SoftBank from the coronavirus: sell $ 41 billion of its assets and use the money to pay down debt and buy its own stock.
Masayoshi hopes that such drastic measures will reassure shareholders of the resilience of his business under the threat of a global recession. "This will allow us to strengthen our balance sheet while significantly reducing the debt." he said in a statement.
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SoftBank now intends to buy 45% of all stocks that exist on the market, after revealing a $ 4.5 billion buyback program earlier this month. It is now the largest cash injection in 38 years of the technology conglomerate.
Until now, it is unclear whether he will resell the shares or withdraw them.
Coronavirus is just the beginning of SoftBank's problems
There is more to the SoftBank saga than the misfortunes of coronaviruses. A series of bad calls made by its venture capital company Vision Fund, supported by $ 100 billion, have also led to debt charges: the most spectacular snafu being the billions injected into the real estate start-up WeWork before its introduction disastrous stock market.
Vision Fund has also made significant investments in carpooling start-ups (Grab, DoorDash and Didi) and hotel groups (Oyo) – two areas hardest hit by coronavirus-related measures.
There is also the issue of Elliott Management, the "vulture fund" which buys in what it perceives as distressed companies and pushes for radical change. He recently amassed a $ 2.5 billion stake in SoftBank, using that leverage to demand a $ 20 billion share buyback program and increased transparency.
In fact, the SoftBank takeover announcement contains an announcement: an independent party had been hired to find three candidates to run as independent board members, further demonstrating the seriousness that Elliott Management currently holds on SoftBank.
The sudden liquidation of $ 41 billion for a disaster relief fund will be enough to appease the shareholders of SoftBank in the long term is not yet clear, but it is a start.
So far, Tokyo traders have responded favorably. SoftBank's share price jumped more than 18% after the announcement of the plan, which, according to CNN, was its largest daily percentage increase since November 2008. Until then, SoftBank's share price had dropped 40% since the start of the year, and its profits were down 99% since its last earnings report.
As to what SoftBank is likely to sell – analysts expect him to reduce his positions in Alibaba, in which he still holds 25% of the capital. Other candidates include the recently merged telecommunications providers T-Mobile and Sprint.
Posted on March 23, 2020 – 4:14 PM UTC