Unlocking Value

On 5 June 2024, the Financial Times reported that Elliot Management, the king of shareholder activism, is targeting SoftBank.

SoftBank doesn’t call itself a closed-end fund, but it might as well be one.

Except being 300 times bigger, SoftBank has a lot in common with China Merchants China Direct Investments (CMCDI, 133 HK). Both are trading at more than 50% discount to NAV. Both invest heavily in technology (Arm and Alibaba in SoftBank’s case). Both invest in other venture funds too (Vision Funds in SoftBank’s case).

In Elliot’s mind, the solution to the large discount is simple: share buyback.

We will continue to follow the SoftBank story and keep you posted.

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2024年6月5日，《金融时报》报道称，股东积极行动的代表人物Elliot Management正在瞄准软银集团（SoftBank）。

软银集团虽然不自称为封闭式基金，但其实质与封闭式基金差不多。

除了规模大了300倍之外，软银集团与招商局中国基金（133 HK）有很多共同之处。两者的股价都低于净资产值50%以上。两者都大量投资于科技领域（软银集团投资了ARM和阿里巴巴）。两者也都投资于其他风险基金（软银集团投资了Vision Fund）。

在Elliot的观点中，解决股价折让问题的办法很简单：股份回购。

我们将继续关注软银集团的动态，并随时更新最新情况。

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Published on the Financial Times on 5 June 2024

于2024年6月5日在金融时报刊登

Elliott rebuilds stake in SoftBank and pushes for buybacks

Elliott Management has rebuilt a substantial stake in SoftBank and is pushing the Japanese tech conglomerate founded by Masayoshi Son to launch a $15bn share buyback.

The US-based activist fund’s position is worth more than $2bn and it has engaged directly with SoftBank’s senior management over the past two to three months, according to people familiar with the matter.

The fund has swooped on SoftBank at a time when the gap between the combined value of the company’s assets and its market valuation has never been wider. After a self-declared period in “defence mode”, SoftBank has a strong balance sheet and billions of cash on hand, which its founder wants to use in pursuit of artificial intelligence deals.

Son has built his current growth strategy around a roughly 90 per cent stake in UK chip designer Arm, whose surging stock market price has lifted SoftBank’s net asset value to a record $180bn. While the conglomerate’s shares have risen more than 50 per cent this year, its current market capitalisation stands at around $90bn. Its shares jumped as much as 5.5 per cent on the news of Elliott’s stakebuilding, in late trading in Tokyo on Wednesday.

According to people familiar with the demands being made by Elliott, the activist fund believes that a $15bn share buyback will deliver an immediate boost to the share price and act as a sign of Son’s confidence in his strategy.

Elliott’s investment is the second time it has targeted Son’s company and is the fund’s latest strike in the Japanese stock market. It previously took a position in Toshiba and holds a large stake in Dai Nippon Printing, the trading house Sumitomo Corporation and the country’s largest listed real estate developer, Mitsui Fudosan.

The firm’s last investment in SoftBank involved building a stake of about $2.5bn in early 2020, while pressing for a $20bn share buyback and governance changes. It had a similar focus on the substantial discount between the value of SoftBank’s asset portfolio and its market capitalisation.

At the time, SoftBank’s investments had a different shape — with a 25 per cent stake in ecommerce giant Alibaba and a heavy focus on high-risk private market investments made by its $100bn Vision Fund. 

Today, SoftBank is built around Arm, with its two Vision Funds increasingly focused on returning cash and a greater proportion of investments publicly listed.

The group’s loan-to-value ratio — net debt as a proportion of the value of its holdings — has also dropped to 8.4 per cent, a level that group chief financial officer Yoshimitsu Goto described in May as “maybe too low to be honest, too safe” and compares with over 20 per cent at the end of 2021.