SoftBank founder Masayoshi Son has promised a ¥ 1tn ($ 8.8 billion) share buyback program over the next 12 months, yielding investor pressure after the company’s Vision Fund unit announced a record quarterly loss of ¥ 825.1 billion.
Market expectations of a new round of share buybacks have risen with some of the company’s largest shareholders, including activist hedge fund Elliott Management, frustrated by the poor performance of the Japanese technology conglomerate’s share price.
The original Vision Fund, SoftBank’s Saudi-backed $ 100 billion investment vehicle, suffered as its publicly traded investments in China were hit by a government crackdown while other big bets, such as South Korean e-commerce group Coupang, faltered.
Despite the setback, Son said it would accelerate the pace of investment for the Vision Fund’s successor fund, which has allocated 15 percent of its $ 33 billion in capital to China since the end of September.
For the July to September quarter, SoftBank reported a net loss of ¥ 397.9 billion compared to a gain of ¥ 627.5 billion for the same period a year earlier, as gains from its domestic telecommunications business helped the Vision Reduce fund unit losses.
In just 12 months, the value of the group’s net assets fell from ¥ 27.9tn to ¥ 20.9tn, mainly due to a regulatory suppression of the Chinese e-commerce group Alibaba.
“We are once again facing a big storm,” Son said at a news conference.
The Vision Funds’ quarterly losses were also larger than a loss of ¥ 788.6 billion that the group reported in the January to March quarter of 2020, when SoftBank launched a $ 23 billion share buyback program to reduce pandemic-induced market unrest that sent its shares to stumble sharply tumbled.
SoftBank shares peaked at 10,700 yen in mid-March, but fell more than 40 percent as last year’s massive share buybacks neared their end.
Son said the board approved a new round of stock repurchases on Monday, though it warned the program might not reach the upper limit within the next 12 months.
“I firmly believe that the current share price offers a great buying opportunity. We will also save enough capital for investments, ”said the billionaire founder, who owns more than one third of the company.
One long-term investor in SoftBank has questioned how long the impact of the new share buyback would last. “The buyback has always been an easy way to drive the short-term stock price, but it does not help long-term institutional investors,” he said. “After a while, the share price tends to slide back and there is confusion among SoftBank investors who should be the share price driver.”
Sun added that the geographical footprint of the Vision Funds is being more diversified, with 35 percent being allocated to the US and 19 percent being deployed in China.
For the second Vision Fund, 9 per cent of its capital is allocated to India where the co-op group Ola and the payment group Paytm plan to launch initial public offerings.