Softbank shares surged more than 17% in morning trade. Softbank Group stated that it would repurchase 112mn shares worth $5.46bn in the next 11 months, or about 10.3% of its total outstanding shares, excluding treasury stock. All of this came as the company announced an excess of 50% surge in its net income for the first three quarters of the fiscal year.
Funded by proceeds from the bumper IPO of its domestic telco, Son stated that the buyback – which stands as the company’s largest ever, according to Reuters—was driven by what he sees as a chronic undervaluation of SoftBank’s shares.
One investor described the share buyback as “enormous.”
“It’s definitely going to … propel the stock, at least in the coming months,” stated Andrew Jackson, head of Japanese equities at SooChow CSSD Capital Markets (Asia), to CNBC’s “Squawk Box.”
“If you go back to 2016, you look at the last large buyback they did, the 500bn buyback then, I mean, the stock essentially doubled in the 12 months after that,” Jackson said. “Whether this is unlocking value in the future … is hard to say.”
“There’s a part of me that thinks maybe (Son’s) trying to make up for the … mispricing in Softbank Corp,” he added, saying the pricing of the domestic telecommunications unit’s IPO was “way too high.”
The buyback comes after SoftBank Group raised $21.2bn in December by listing about a third of the shares in SoftBank Corp, which on Tuesday reported a 24% jump in quarterly operating profit.
Beyond the announced share buyback, Dan Baker, an analyst at Morningstar, pointed to other possible reasons for Thursday’s strong gains.
One of those was that Softbank earnings were presented in a different manner to highlight “sum-of-the-parts valuations rather than discussing results of individual businesses,” Baker told CNBC in an email.
Baker also cited the additional details surrounding the performance of SoftBank’s Vision Fund and the use of hedging to lock in the company’s gains in chipmaker Nvidia as potential catalysts for the stock moving upward.
Softbank announced on Wednesday that it had dumped its entire stake, worth more than $3bn, in Nvidia in January.