SoftBank Group adds $ 14 billion to market value as equities skyrocket after third quarter buyout

By Sam Nussey

TOKYO (Reuters) – SoftBank Group Corp. shares jumped 17 percent on Thursday, adding $ 14 billion to the Japanese technology giant's market value after announcing a record buyback of shares and a quarterly operating profit increase.

The managing director, Masayoshi Son, is often complaining about the persistent downsizing on SoftBank's conglomerate and is using some of the manna coming from the IPO of its national operator to try to reduce the price. valuation gap.

The buyout "puts a floor in the shares of SoftBank," wrote in a note Atul Goyal, an badyst at Jefferies.

SoftBank's shares climbed to 9,955 yen, recording their biggest gain in a day in a decade.

They have risen 36% since the beginning of the year, but they are still lower by about 14% at the peak of 11,500 yen reached in September, before worrying about financial ties that unite SoftBank in Saudi Arabia following the murder of Saudi journalist Jamal Khashoggi.

SoftBank announced that after the market closes on Wednesday, it would buy up to 600 billion yen ($ 5.46 billion) of its stock, financed by proceeds from SoftBank Corp's IPO. .

"There was no consensus on how to value SoftBank," said Hideki Yasuda, an badyst at Ace Securities.

After the IPO, the group "looks more like an investment trust and is becoming easier to understand," Yasuda said.

SoftBank Group Corp. also announced a 60% increase in operating profit in the third quarter, driven by higher valuations of its growing technology investments.

The company announced that in January it sold its stake in chip maker Nvidia, which was suffering from weak gaming chips demand in China, offsetting the bulk of the recent fall in the price of its shares through derivative contracts.

At a results briefing on Wednesday, Son presented a 90-minute presentation on SoftBank's investment strategy and on what he considers to be a chronic undervaluation of his actions.

Markets tend to discount conglomerates and reward changes that drive a firm toward narrower targeting, with investors generally viewing small businesses as more transparent and easier to evaluate.

The market value of SoftBank is currently around 11 trillion yen ($ 100.10 billion). But when its holdings in SoftBank Corp., the Vision Fund, financed by Saudi funds, the designer of Arm Holdings chips and others are taken into account, the company's holdings, net of debt, are worth $ 21 trillion. of yen, said Son.

According to badysts, SoftBank would have a hard time getting rid of its big stake in companies like Yahoo (NASDAQ) in Japan without lowering the share price and selling its stake in Ali Baba (NYSE 🙂 is likely to result in a hefty tax bill.

And with many of its investments in unlisted and loss-making startups, investors remain dependent on SoftBank for disclosure of valuations.

The benchmark was down 0.7% early in the afternoon.