SoftBank launches $41 billion share buyback, debt reduction scheme

Share prices spiked on the news assets would be sold off.

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SoftBank has announced a 4.5 trillion yen ($41 billion) share buyback and debt reduction scheme, sending share prices soaring.

The Japanese tech conglomerate said on Monday (.PDF) that its board of directors has approved the sale of up to $41 billion in assets to shore up the company's precarious financial position. 

It is currently not known what assets will be sold, but the news ramped SoftBank share prices up in a huge gain of over 18% in a single day of trading. At the time of writing, SoftBank shares are worth 3,187 JPY.  

Under the terms of the new initiative, SoftBank will buy back up to $18 billion in common stock and the balance will be used for "debt redemptions, bond buybacks and increase cash reserves."

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The $41 billion scheme will run over the next four financial quarters and is being launched in tandem with SoftBank's previously announced 500 billion yen ($4.8 billion) share buyback program. 

Up to 7% of SoftBank shares will be purchased under this scheme, announced earlier in March and brought forward following pressure from Paul Singer's Elliott Management Corp. Singer is a heavyweight SoftBank investor with a stake of approximately $3 billion. 

SoftBank has long believed its shares are "substantially undervalued." The two buybacks, combined, will retire 45% of overall stock. 

SoftBank Group says that the company holds over 27 trillion yen ($245 billion) in assets and over $15 billion in cash on the balance sheet. 

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"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," said Masayoshi Son, SoftBank Group CEO. "This will allow us to strengthen our balance sheet while significantly reducing debt."

The executive added that monetizing these assets represents less than 20% of the firm's full portfolio and asset value. 

An analyst told Reuters that SoftBank could first look towards selling stakes in the merged Sprint and T-Mobile US, or may potentially attempt to sell its shares in Alibaba. 

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The company has faced a tumultuous financial time due to the loss-making SoftBank Vision Fund, a unit responsible for problematic investments including WeWork, Uber, and Slack. In Q3 2019, the fund reported an operating loss of 225 billion yen, the second quarter in a row that has severely impacted SoftBank's bottom line. 

SoftBank also said an independent company has been hired to headhunt three qualified candidates to join the board.  

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