A major US activist fund on Friday confirmed a “substantial investment” in Japan’s SoftBank Group, boosting the stock of the giant technology investor.
“Elliott’s substantial investment in SoftBank Group reflects its strong conviction that the market significantly undervalues SoftBank’s portfolio of assets,” said a spokesperson at the US fund.
“Elliott has engaged privately with SoftBank’s leadership and is working constructively on solutions to help SoftBank materially and sustainably reduce its discount to intrinsic value,” the spokesperson added.
The comment came after The Wall Street Journal reported Elliott Management had quietly built up a more than US$2.5 billion stake in SoftBank.
That would account for nearly 3% of the group’s market value, which stands at $95.5 billion on Friday.
Without confirming Elliott’s investment amount, the Japanese group also said its stock price was “deeply undervalued.”
“SoftBank always maintains constructive discussions with shareholders regarding their views on the Company,” it said in a statement.
“We are in complete agreement that our shares are deeply undervalued by public investors. SoftBank welcomes feedback from fellow shareholders,” it said.
SoftBank Group shares jumped on Friday, gaining more than 6% by midday.
The news of Elliott’s investment “helped spread an evaluation (among investors) that the stock is cheap considering assets the group holds,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Institute.
SoftBank, led by CEO Masayoshi Son, has taken stakes in some of hottest start-ups through its $100 billion Vision Fund.
Elliott Management could also lend its expertise to Vision Fund on where best to invest, Sengoku said.
Also, “when shareholders and management share the view that the stock price is low, it fuels expectations that they will eventually announce price-boosting measures such as share buy-backs,” he said.
The group suffered an operating loss of $6.4 billion in the second quarter, the worst in its history, as it took a hit from investments in Silicon Valley start-ups including WeWork and Uber.
The disappointing results follow a turbulent period for the firm and Son has faced criticism over his commitment to start-ups some say are overvalued and lack clear profit models.
The group last year announced its long-mooted Vision Fund 2, again targeting funds of about $100 billion, but investors have been slower to commit.