On March 23, technology giant SoftBank Group (SBG) announced a $41bn asset sale in an effort to shore up company finances in light of the coronavirus outbreak. The Japanese firm has significant levels of debt and relies on strong equity markets to meet its financing needs. Before CEO Masayoshi Son announced the asset sale, SBG’s share price had experienced a decline of around 38 percent over the last month.
In order to raise the $41bn that Son believes is necessary to safeguard the company’s future, part of SBG’s stake in China’s Alibaba Group – worth approximately $14bn – is likely to be sold. Moreover, the firm will buy back JPY 2trn ($18bn) of its own shares, in addition to the JPY 500bn ($4.5bn) repurchase that it committed to earlier this month. Collectively, SBG’s buyback would represent around 45 percent of the company’s stock.
Although the coronavirus pandemic has crippled businesses the world over, SoftBank also has financial issues of its own making
“This programme 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 Son in a press release. “This will allow us to strengthen our balance sheet while significantly reducing debt. Moreover, the monetisation of assets represents less than 20 percent of the company’s current asset value.”
Although the coronavirus pandemic has crippled businesses the world over, SBG also has financial issues of its own making. The firm is well known for making sizable investments in innovative start-up – some of which pay off, and others that do not. Last year, Son was forced to admit that SBG had lost around $4.6bn from its ill-fated investment in the real estate start-up WeWork.
Son has made a name for himself in the business world through SBG’s Vision Fund, a technology-focused venture capital fund that supports emerging technologies. These investments are often fraught with risk, however, and in the current business climate, are likely to take a back seat while SBG tries to secure its own future.