SoftBank Group said Monday it would sell up to US$41 billion in assets to finance a stock buyback, reduce debts and increase its cash reserves.
In a statement, it said it would buy back $18 billion of its stock, with the remaining money to be used on debt, bond buybacks and cash reserves, setting a four-quarter timetable for the transactions.
News of the massive buyback sent SoftBank stock limit-up, soaring more than 18% in the last hour of trade in Tokyo.
“This program will be the largest share buyback and will result in the largest increase in cash balance in the history of SBG, reflecting the firm and unwavering confidence we have in our business,” the firm’s chairman Masayoshi Son said in a statement.
“This will allow us to strengthen our balance sheet while significantly reducing debt,” he added, saying the assets being sold account for “less than 20% of the Company’s current asset value.”
The statement said the firm believes its shares are now “substantially undervalued” and that the buyback would see 45% of the firm’s stock repurchased and retired.
It said the massive program would “further strengthen its balance sheet and enhance its credit rating.”
SoftBank has seen its stock sink in recent weeks on worries about the liquidity of the heavily indebted company, as global financial markets are roiled by fears about the economic consequences of the pandemic.
It had already announced a massive share buyback that prompted S&P Global Ratings to cut the firm’s outlook to negative, a move some analysts said misinterpreted the company’s health.
Some said Monday’s move should also be viewed positively.
“It’s not a bad strategy to use their cash for buying back shares when the outlook of the market and the economy is very uncertain,” said Yoshihiro Okumura, general manager at Chibagin Asset Management.
“The market took the surprise announcement positively at a time when it’s hard to find good investment destinations.”