SoftBank Group Corp. has announced a ¥500 billion ($3.4 billion) share buyback in response to pressure from activist investor Elliott Investment Management. This move comes after a significant selloff and marks a strategic effort to bolster the company’s stock price.
The Tokyo-based tech giant plans to repurchase up to 6.8% of its free-floating shares by August 7, 2025, as per a release issued on Wednesday. This announcement follows Elliott’s acquisition of a substantial stake in SoftBank earlier this year and their advocacy for a larger $15 billion buyback, according to sources familiar with the matter.
Strategic Shift Amid Market Volatility
Founder Masayoshi Son’s decision to initiate the buyback aligns with his broader strategy of preparing for a substantial investment in artificial intelligence (AI). This decision also comes at a time when the market is recalibrating the potential impact of AI on future earnings, leading to a market correction. On Monday, SoftBank’s stock experienced its steepest drop since 1998, but recouped much of the loss by mid-week. However, the company’s market value remains over $40 billion below its July peak.
“Son-san has a history of significant buybacks during challenging times, and this appears to be no exception,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte in Singapore. “The details are crucial, but it’s positive to see such a substantial commitment to a buyback.”
During the COVID-19 pandemic, SoftBank spent approximately ¥4 trillion on stock repurchases to stabilize its share price. This latest buyback is expected to ease some of the pressure to improve shareholder returns, according to Kirk Boodry of Astris Advisory. “A ¥500 billion buyback should generate some excitement, even if it falls short of previous programs and activist investor expectations,” he said. “It’s a manageable size alongside an accelerated AI investment program.”
Financial Performance and Strategic Moves
On the same day as the buyback announcement, SoftBank reported a smaller net loss of ¥174.28 billion for the June quarter, compared to a ¥477.62 billion loss a year earlier. This improvement was attributed to solid earnings from chip unit Arm Holdings Plc, which helped offset continued losses in Vision Fund assets.
Despite ongoing challenges with numerous loss-making startups in its Vision Fund portfolio, the company remains focused on navigating the evolving tech landscape. The Vision Fund reported a loss of ¥204.3 billion, down from a profit of ¥61 billion, due to declining share prices of publicly-listed portfolio companies like AutoStore Holdings Ltd. and Symbotic Inc., and markdowns on unlisted startups.
SoftBank, which holds significant stakes in Japan’s third-largest mobile carrier and chip designer Arm, has ample cash reserves. As of June, the company had ¥5.5 trillion in cash and cash equivalents. Its ability to raise additional funds has been bolstered by Arm’s successful initial public offering last year and a sale of T-Mobile US Inc. shares to Deutsche Telekom AG.
Future Investment in AI
Despite recent market turbulence, Son remains committed to substantial AI investments. Bloomberg reported in February that SoftBank plans to deploy around $100 billion into AI-related chips. Last month, the company acquired British semiconductor startup Graphcore Ltd., which designs AI-program semiconductors but has faced challenges in competing with industry leader Nvidia Corp.
Son is increasingly channeling investments through SoftBank’s holding company rather than the Vision Fund, which he established seven years ago. In recent quarters, the Vision Fund has been selling down assets and slowing its investment pace, while its team advises the holding company on potential targets.
With this buyback and a clear focus on AI, SoftBank is poised to leverage its substantial cash reserves and strategic investments to navigate the complex tech landscape and deliver value to its shareholders.