(Bloomberg) — Elliott Management has built a sizable stake in SoftBank Group Corp. and is pushing the Japanese investment firm to launch a $15 billion buyback, according to people familiar with the matter.
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The U.S. activist investor has accumulated a stake valued at more than $2 billion and has engaged with SoftBank executives in recent months, the people said. Elliott argues that a share buyback of this magnitude would help founder Masayoshi Son signal to the market his confidence in SoftBank. His shares rose 4.6% in Tokyo.
It is the second time that Paul Singer’s company has targeted SoftBank, which was once one of the largest and most influential technology investors in the world. Elliott accumulated a stake worth about $3 billion in 2020, after which SoftBank dramatically accelerated its pace of buybacks. Elliott later sold much of its stake in the Tokyo-based company.
Representatives for SoftBank and Elliott declined to comment. The Financial Times first reported Elliott’s investment on Wednesday.
Elliott’s decision – the latest in a series of Japanese deals for the company – comes amid a resurgence of activist investor interest in the country. It also comes as SoftBank prepares to be more aggressive again in investments in AI and other areas following a surge in the value of key assets including chip unit Arm Holdings Plc.
Arm’s rise and the boost it gives the holding company’s net asset value give SoftBank less reason to make buybacks, said Marvin Lo, an analyst at Bloomberg Intelligence. Investors may be more inclined to focus on SoftBank’s long-term strategy rather than short-term returns, he said.
“SoftBank did not carry out share buybacks when the company was in defense mode. The chances of this happening now may be slim, given that Masayoshi Son is ready for a full AI strategy,” he said.
SoftBank shares hit ¥9,000 per share before the Elliott news hit, far above the ¥5,000 to ¥7,000 range of the past two years.
Elliott is targeting SoftBank in part because of a large disparity between the company’s market value and the net value of its assets – something Son himself has repeatedly pointed out to argue that the company’s shares are undervalued. London-based senior portfolio manager Nabeel Bhanji, who has been instrumental in guiding Elliott’s investments in Tokyo, is managing the firm’s position.
“That headline number of $15 billion in buybacks will attract a lot of quick-money buyers,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte. “They clearly mean business, so this has the potential to gain traction.”
But Son plans to go back on the offensive after years of mistakes at the Vision Fund, the investment group he created to bet billions of dollars on startups. The fund is now constantly selling and writing down assets in its portfolio as Son turns his focus to AI and semiconductors.
SoftBank had accumulated a cash pile of ¥6.2 trillion ($40 billion) at the end of March. Its loan-to-value ratio fell to 8.4%, close to an all-time low and well below the company’s target of 25%. This is one of Son’s favorite metrics for determining whether the company is properly balancing risk and opportunity.
The company has plans for a good chunk of this capital. Son is seeking up to $100 billion to fund a chip venture to compete with Nvidia Corp. and supply critical semiconductors for AI, Bloomberg News reported in February. The Japanese company is also in talks to acquire British semiconductor startup Graphcore Ltd., Bloomberg reported.
“The company has room to invest up to $30 billion, assuming it keeps its loan-to-value ratio below 30%,” Lo said.
–With assistance from Winnie Hsu, Dinesh Nair and Momoka Yokoyama.
(Updates with details and analyst comments in last two paragraphs)
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