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Softbank adds $15 billion to market value overnight

Softbank-adds-15-billion-GBO

Masayoshi Son, the founder of SoftBank Group Corp. added about $15 billion to the market value of his company—by unveiling a plan to buy back shares worth a third of that amount

The value of Son’s stock in SoftBank rose by about $4bn, and his personal fortune rose about $2.6bn after the rally, according to the Bloomberg Billionaires Index, which excludes pledged shares from net worth calculation.

Son notably opened his earnings presentation with a riddle: “25 – 4 = 9?” The formula stands for the 25 trn yen value of Softbank’s assets minus the 4 trn yen in debt, which is far from being equal to its market capitalization of 9 trn yen. It was designed to capture Son’s longstanding argument that SoftBank’s share price does not reflect the value of its business and investments, a gap he’s been trying to close for years. Even after the boost and the stock rising as much as 3.1% on Friday, SoftBank’s total value is a long way from Son’s goal.

This makes it the biggest ever buyback for SoftBank. The company plans to buy back as much as $5.4bn starting today through the end of January next year. SoftBank’s shares jumped by their daily limit, gaining 18% in Tokyo. Son has had success with buybacks in the past. In 2016, he announced the Tokyo-based company would buy as much as $4.5bn (500 bn yen), which sent shares up by the limit the next day. The price doubled over the next year.

The buyback is funded by the proceeds from the 2.4trn yen IPO of the company’s telecom unit in December. While SoftBank Group’s shares have gained 36% this year, the telecommunications unit it trading about 13% below its IPO price.

It’s worth remembering that SoftBank’s shares retreated after they doubled following a share buyback in 2016. Son also stated that he would spend $6.3bn from the telecom IPO to pay down SoftBank Group debt.

The shares of SoftBank closed at 9,962 yen ($90), still a 50% discount to Son’s sum-of-the-parts calculation that puts shareholder value at 20,055 ($182) a share.

Most of SoftBank’s assets remain in mature companies like Alibaba, Sprint and Yahoo Japan. That’s why Son has been focusing more on the $100bn Vision Fund and its portfolio of private companies that includes the world’s biggest ride-hailing company Uber Technologies Inc. and co-working giant WeWork Cos.

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