Another day, another $5 billion in the purse for SoftBank’s Chief Executive Officer Masayoshi Son. The Japanese business mogul saw a boost to his net worth after he maneuvered the biggest stock buyback in his company’s history. On Wednesday, shares of the SoftBank Group surged after Son announced that the firm would be initiating a stock buyback following the favorable financial performance it recorded in Q4 2018.
The $6 billion Buyback
Son has always favored reinvesting his capital on technological innovation and investment opportunities, and this $6 billion stock buyback presents an opportunity for the company to do just that. The CEO unveiled the stock buyback, the largest in the company’s history, as a means of bridging the divide between what he thinks is the company’s current market value and its actual worth. The buyback will be bankrolled by the profits recorded from the $21 billion Initial Public Offering (IPO) that was launched by SoftBank’s telecommunication unit in late 2018.
After the announcement, the company’s stock price jumped as much as 17.73 percent, the highest intra-day stock jump since November 2008, and it closed the day at $90.52. At a post-earrings presentation on January, Son explained exhaustively that net of debt, SoftBank’s total holdings are worth $190 billion, while the company’s market value remains pegged at $81 billion.
The Giant Wants More
Son’s ideal valuation of the company pus into account SoftBank’s barrage of investments, which include its $21 billion telecoms division, $24 billion invested each in both Arm Holdings and the Vision Fund, a stake in e-commerce giant Alibaba worth $11 billion, $23.6 billion spent on U.S.-based mobile services carrier Sprint and even millions of dollars in American based robotics company Boston Dynamics.
He said, “What is that gap all about? Isn’t that weird? I personally think the share price is too low.” The company said that it would be purchasing up to $5.46 billion of its stock after the market closed on January 6, with December’s IPO profits bankrolling the transaction. The buyback ended up adding over twice that amount to the company’s stock value. As a result of that, SoftBank’s total market capitalization rose by about $17 billion, ending the day at $99 billion.
However, at press time, the company’s market cap has been adjusted, and it’s holding steady at $93 billion. Son will also be smiling to the bank as a result of this. Based on his stake in the company, Son’s net worth saw a jump of over $5 billion from the stock surge.
SoftBank Always Profits from Buybacks
This isn’t the first time SoftBank is profiting off a significant stock buyback. Back in February 2016, the company announced that it would be repurchasing as much as 500 billion yen of its stock (worth $4.4 billion at the time). The buyback, which then was the largest in the company’s industry, sent stocks soaring 16 percent, as shares witnessed a $6 upsurge. Over the course of the next year, the price doubled.
Concerning the plans of the conglomerate, Son was quite tight-lipped. He stated that apart from the $5.46 billion used for funding the stock buyback, $6.3 billion of the total amount of money raised by the IPO will go towards repaying the company’s debts, another $6.3 billion will be directed towards further investments.
Last modified: October 5, 2020 12:44 PM