SoftBank Plans $3.5 Billion Buyback After Surprise Quarterly Loss — 2nd Update

By Megumi Fujikawa

TOKYO--Japanese technology investor SoftBank Group said it plans to buy back up to about $3.5 billion of its shares--an encouraging sign for the Tokyo stock market, which recently suffered its worst day in decades.

SoftBank Group said Wednesday that it will buy back up to 6.8% of shares available, valued at up to 500 billion yen, or $3.46 billion, over the next 12 months.

The announcement is likely to help lift sentiment in the Japanese stock market after the Nikkei Stock Average on Monday suffered its biggest single-day percentage drop since 1987. Share buybacks can benefit investors by boosting a company's per-share earnings.

SoftBank's own share price has fallen by more than one-third from its peak in July.

Recently, activist hedge-fund manager Elliott Investment Management has pressured SoftBank to buy back $15 billion of stock, according to a person familiar with the matter.

SoftBank Group Chief Financial Officer Yoshimitsu Goto said at a news conference that the company's decision on the buyback was made on its own and wasn't influenced by any individual investor.

"We need to demonstrate our readiness and protection as a company to investors and stakeholders" when the market gets volatile beyond theoretical values, Goto said.

The company on Wednesday also reported a surprise first-quarter loss after two consecutive quarters of profits.

It booked a net loss of Y174.28 billion for the quarter ended June, narrowing from Y477.62 billion a year earlier but missing a modest profit expected by analysts.

The company reported total investment gains of Y559.7 billion, including those from the holding company and its Vision Funds investment vehicle.

Meanwhile, it posted a Y443.9 billion loss related to foreign-exchange rates as a weak yen inflated its dollar-denominated liabilities.

Based on the dollar/yen rate and stock market prices as of Tuesday, SoftBank's net asset value stood at Y24.9 trillion at the end of June, compared with Y27.8 trillion as of the end of March.

"The market is on a downward trend, which is a good opportunity for us to invest," said Goto, who started his career as a banker in 1987.

The current situation looks similar to the dot-com bubble when investors weren't completely sure of the true value of companies, such as Amazon and Microsoft, which are leading the technology sector today, Goto said. The same can be said for the recent artificial-intelligence boom, he added.

Goto said SoftBank's financial health is solid with ample cash, but the company should take a "conservative" approach, given market volatility.

After years of playing a defensive strategy, Chief Executive Masayoshi Son has said the company would look for investment opportunities more actively in the field of AI.

But the outlook remains uncertain due to the recent global stock market turmoil, which has hit the technology sector especially hard.

Shares of U.K. chip designer Arm, SoftBank's subsidiary which Son has been focusing on, has dropped nearly 40% from its July peak. Last week, the company left its full-year revenue forecast unchanged despite reporting robust revenue for the first quarter.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

August 07, 2024 06:18 ET (10:18 GMT)

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