Anika Begay
By Anton Bridge
TOKYO (Reuters) – Japan’s SoftBank (TYO:) is expected to report modest first-quarter profit on Wednesday, but investors are eager to find out whether the technology investment giant will announce a major share buyback or signal its willingness to undertake one.
The results come amid market turmoil, particularly for large-cap Japanese stocks and major technology companies, both of which SoftBank is a part of, hurt by a massive unwinding of yen carry trades and U.S. recession fears. Its shares fell nearly 20% on Monday but recovered nearly half of those losses by Tuesday afternoon.
This year, SoftBank CEO Masayoshi Son has faced renewed pressure from investors to buy back shares, as the company’s market capitalization trades at a steep discount to its overall asset value, a discount that continues to widen.
Most analysts estimate the discount at around 60%, compared to 53% at the end of March and 36% at the end of June 2023.
Notably, activist investor Elliott Management has requested a $15 billion share buyback program after rebuilding a stake worth more than $2 billion, a person familiar with the matter said in June.
Several analysts have since echoed that call, with some noting that this week’s market turmoil has likely created an even wider gap between SoftBank’s market value and its net asset value, strengthening the case for a sizeable share buyback.
They also pointed out that SoftBank had $26 billion in cash on hand at the end of March.
“We think they’re in a very comfortable position on the balance sheet,” said Rolf Bulk of New Street Research, who believes SoftBank should launch a share buyback program worth more than $10 billion.
SoftBank’s net profit was likely 109 billion yen ($748 million) between April and June, according to an average of five analyst estimates compiled by LSEG and Reuters. That would mark its third consecutive quarter of profit and compares with a loss of 316.2 billion yen in the same period a year earlier.
The investment giant, whose largest stake is a 90% stake in chip design firm Arm, has been cautiously rebuilding its finances after office-sharing startup WeWork failed and SoftBank’s portfolio of tech companies in its two Vision Funds fell out of favor amid high interest rates.
Over the last two financial years, it has invested only about $4 billion.
More recently, SoftBank led a $1 billion funding round in British self-driving car startup Wayve and bought British artificial intelligence chipmaker Graphcore for an undisclosed sum in July.
It invested $200 million in Tempus AI, which works in AI-powered precision medicine, in April before the startup went public on the Nasdaq in June. SoftBank and Tempus announced a Japan-based joint venture that same month.
($1 = 145.67 yen)
