SoftBank Group Corp closed at 4735 JPY on 17/04/2020, up 6.88% from the previous day and showing a very strong and swift recovery from its 2687 JPY low on 19/03/2020. I bought in at 3294 JPY which puts me up 43.75% helping offset some of the losses to my Japanese equities portfolio that has taken a beating throughout the COVID-19 selloff.
In the past couple of months, the stock plummeted rapidly below its 200 Day EMEA, bottomed out at 2609.5 and since then has been making a swift recovery. Below I summarise some of the recent news that has been driving the abrupt movements in the stock:
Feb 12th/13th: the approved sale of Sprint to T-Mobile resulted in the stock surging 14%.
- Reduce the firm’s debt burden by $40 billion.
- Greater ability for Masayoshi Son to raise capital for a share buyback
- Further talks of a second Vision Fund
Mar 23rd: SB to raise $41 billion for share buyback and cut debt
- 500 billion yen buyback from monetisation of assets (Sprint, Alibaba, Redex Holdings)
- The move comes following a massive discount of 73% to assets
- Buyback proceedings to be used to repay debt and increasing cash reserve
Apr 2nd: SB pulls out of the $3 billion tender offer for WeWork
- As of today 19th April, as I write this post we know that WeWork directors are doing everything that they can to speed up the lawsuit however this is being hindered by the COVID-19 pandemic
Apr 13th: SB announces that it expects to book a loss of $16.7 billion on its $100 billion Vision Fund.
Below we can see some of the volatile daily returns for SB in the past quarter.
Investors will continue to monitor company leverage and further asset sales for stock repurchases.
The high leverage has been a concern and has been impacting the company’s borrowing costs (to note that a lot of the debt is held by investors including Saudi Arabia’s wealth fund).
March 23rd saw yet another share buyback, this time an announcement of 2 trillion yet which saw the stock price soaring back to 3700-4000 range. Masayoshi Son does not like a deflated stock price and although not of similar magnitude this is a move that has been re-occurring over the years.
|For: 16 March 2020|
We can see a deterioration in profit margins, ROA and ROE.
Softbank’s 2019 Fiscal Year Financial Report
Continued focus on tech investment, special focus on AI technology, long term vision of investing in growth opportunities and creating value.
Overall SB is and will remain an interesting stock for me, however uncertainty will continue impacting portfolio investments as turmoil continues. A lot of corporate value creation (or destruction) will be driven by Masayoshi Son’s Vision Fund and how it performs in the upcoming hostile economic environment. There is a lot of negativity at the moment surrounding this stock. It is also interesting to see activist investor funds such as Elliot Management Corp have started acquiring big stakes in SB, this is also something that I will be closely monitoring.
Analyst ratings for SB remain strong (for SBI Security ratings distributions, there are 8 strong buys and 1 strong buy) and the price target currently stands at 6,807 JPY which indicates a lot of upside value to be unlocked from the current close of 4735.