SoftBank Continues To Be Valued At An Unwarranted Discount
What Softbank's Stock Price Tell Us About Alibaba's Valuation (And Why It Makes Yahoo Look Even Cheaper)
Jeremy Raper • 19 Comments
Jeremy Raper • 19 Comments
SoftBank: For Exposure To Alibaba, Look To Tokyo, Not Sunnyvale
Helix Investment Research • 31 Comments
Helix Investment Research • 31 Comments
Tue, Jul. 19, 3:15 AM
- SoftBank (OTCPK:SFTBY) fell 10% as investors reacted to the company's announcement to acquire ARM Holdings for $32B.
- Shares of messaging app Line (Pending:LN) also dropped 10% following a successful dual listing last week in New York and Tokyo.
- Nintendo (OTCPK:NTDOY) continued to climb on "Pokemon GO" fever, trading up 14%. Its market cap, now over $42B, has just topped Sony.
Wed, Jun. 1, 8:10 PM
- Alibaba (NYSE:BABA) disclosed terms of its buyback from SoftBank (OTCPK:SFTBY +1.5%), part of the latter company's $7.9B (at minimum) divestment of holdings in the Chinese retail conglomerate.
- It's agreeing to buy just over 27M shares at $74/share, for an aggregate of $2B worth. Members of the Alibaba partnership are buying just over 5.405M shares at the same price, for an aggregate of $400M worth.
- Alibaba closed down 6.5% today, to $76.71 (just 3.7% over the buyback price) in the wake of the news that SoftBank was unloading the sizable stake to raise capital.
- SoftBank also agreed to separate private placements of Alibaba shares amounting to $500M to Gamlight (part of GIC Private Limited) and $500M to Aranda Investments, part of Temasek. Those are at the same $74 share price.
- Previously: Goldman reiterates Buy on SoftBank after surprising Alibaba stake sale news (Jun. 01 2016)
Wed, Jun. 1, 10:31 AM
- Alibaba (NYSE:BABA) is 2.7% lower in U.S. trading, and SoftBank (OTCPK:SFTBY) up 1.7%, the morning after the Japanese company said it would sell at least $7.9B worth of the Chinese retail conglomerate -- a move that surprised Goldman Sachs.
- The impact of such a sale on Alibaba is minimized somewhat by the way it's put together, says SunTrust's Bob Peck. Some $2B in sales are of shares back to Alibaba (and another $400M to members of the Alibaba Partnership), while a newly created trust is offering $5B in securities exchangeable into Alibaba ADS.
- Goldman's Ikuo Matsuhashi says the news came as a surprise, as many hadn't expected SoftBank to “move so quickly in terms of selling a stake in Alibaba given many market observers still believe that the latter has upside."
- Matsuhashi is maintaining a Buy rating on SoftBank and a target price of ¥7,800, 24.8% upside from its current Tokyo price of ¥6,252.
- As for Sprint (S -0.1%), Matsuhashi says the move isn't indicative of a change in circumstances there, since SoftBank management has already (and recently) expressed confidence that the U.S. telecom's earnings would improve.
Tue, May 31, 5:08 PM
- SoftBank (OTCPK:SFTBY) says it will sell at least $7.9B worth of its stake in Alibaba (NYSE:BABA) as part of a series of capital-raising transactions.
- Alibaba shares are 2% lower in after-hours trading on the NYSE.
- Specifically, SoftBank says, it will sell $2B in ordinary shares back to Alibaba; sell $400M worth to members of the Alibaba Partnership and $500M to a "major sovereign wealth fund"; and use a newly formed trust to offer $5B of mandatory exchangeable trust securities, exchangeable into ADS of Alibaba, to qualified institutional buyers in private placement.
- SoftBank will increase its liquidity cushion with the moves, it says.
- Afterward, it expects to continue to hold about 28% of outstanding Alibaba shares.
Mon, May 23, 11:10 AM
- Tencent (OTCPK:TCEHY +0.5%) is in early-stage talks to take over SoftBank's (OTCPK:SFTBY +1.9%) majority position in Finnish mobile-game maker Supercell, The Wall Street Journal reports.
- Supercell makes popular combat simulator Clash of Clans, and SoftBank took majority control with a $1.53B investment in 2013, before growing its stake last year to 73%.
- Also last year, Alibaba (of which SoftBank is the biggest shareholder) teamed up with China's Giant Interactive Group to talk about taking control of Supercell, though price has hung up those discussions. And Supercell is said to prefer having autonomy under SoftBank's umbrella.
- Sources say that Supercell was valued about $5.25B last year. Its most recent game, Clash Royale, was the top-grossing mobile game for March with more than $80M.
- Now read Tencent: Like Buying Facebook At A Bargain »
Wed, May 4, 11:45 AM
- SoftBank (OTCPK:SFTBY -1.4%) still looks like a bidder in the FCC's broadcast incentive spectrum auction.
- But the company "won't be a big buyer," a source tells CTFN.
- The participation of SoftBank in the auction has been an open question, with spectrum-rich Sprint (S -4.6%) electing to sit out what could be an expensive endeavor. So if it's taking part, it's likely looking for opportunistic purchases and "niche fill-ins."
- SoftBank has been using creative financing to help Sprint with liquidity issues, and so a chance to bid on bargain spectrum could present itself with an obscurely named entity or smaller partner.
- Now read Implications Of SoftBank Split »
Fri, Apr. 22, 7:14 PM
- Yahoo (YHOO -0.5%) and advisers are set to spend the weekend narrowing down more than 10 first-round bids for its core business, ranging from $4B-$8B, Bloomberg reports -- with an eye to moving forward as soon as next week.
- They'll aim for about seven finalists and plan to offer them increased access to internal docs and management.
- The higher-end bids reportedly came from bidders who haven't spent as much time with Yahoo, which should lead to more scrutiny into the structure of the offers.
- In addition to the known bidders (that hadn't denied reports) -- Verizon (VZ +1%), YP Holdings, TPG, and Bain/Vista Equity Partners -- one or two other strategic firms were involved.
- Echoing earlier reports, SoftBank (OTCPK:SFTBY +3.4%) isn't in the bidding but is likely eager to talk with anyone who also wants the Yahoo Japan stake.
- Despite the progress, a final decision is likely at least a month away.
- Now read Yahoo Sale Could Reboot Online Ad Competition »
Fri, Apr. 22, 4:13 PM
- A group of SoftBank (OTCPK:SFTBY +3.1%) investors have written the boards of that company and Sprint, calling for a probe into SoftBank heir apparent Nikesh Arora over alleged conflicts of interest.
- The investors also claimed he's overpaid and making poor investment choices. The letter, sent to the boards earlier this year, says Arora isn't just responsible for global investment activity at SoftBank -- he's also a senior adviser at private-equity firm Silver Lake.
- "Thus, he oversees the process of identifying and pursuing potential investment opportunities in the technology sector (at SoftBank)," the letter states "This dual role has the potential to reward Silver Lake to the detriment of SoftBank."
- Stakes in DramaFever and Housing.com have soured as well, the letter says, suggesting poor investment performance, and that $138M in pay -- making him the third-highest paid exec in the world -- is "excessive."
- "I think my track record speaks for itself," Arora says. "Since my time at SoftBank, the last 18 months, I always strived to put the company first and I think none of the comments have any substantive bearing in fact."
Wed, Apr. 20, 10:59 AM
- With Yahoo's (YHOO +3%) first-round bid shortlist out, where was Daily Mail & General Trust (OTCPK:DMTGY)? The operators of the world's most-visited English-language website were a prominent late arrival to the Yahoo bidding scene, but took a back seat (joined by IAC, Comcast and Time Inc.) to Verizon, YP, Rakuten and private equity.
- Daily Mail now says it didn't put a bid in with Yahoo by Monday's deadline, but it is in talks with parties interested in Yahoo. The publisher is up 0.6% in London.
- Yahoo's process may become a full-fledged saga for 2016. Not only is the existing sale process quite likely to run into June, but secondary interest in the resulting asset mix from the likes of Alibaba (BABA +0.7%), SoftBank (OTCPK:SFTBY -0.1%) and Daily Mail could mean even more transfers of businesses ahead.
- Alibaba had a strong (if less dramatic) case to become a dark horse, since it may have been able to pull off the functional equivalent of a highly tax-advantaged buyback.
- Now read Yahoo: Who's Ready To Take On A Legacy Digital-Native Media Turnaround? »
Wed, Mar. 23, 4:17 PM
- SoftBank (OTCPK:SFTBY -1.8%) has become the latest to invest in Hollywood talent, putting $250M into agency WME/IMG.
- That's good for a 5% stake in the talent and sports agency, which became a more formidable competitor to Creative Artists Agency with the merger of its parts WME and IMG in 2013.
- CAA had received its own $250M investment from TPG Capital in the fall. For its part, SoftBank has also been poking around Hollywood, investing $250M into producer Legendary Entertainment late in 2014.
- The new investment dilutes WME/IMG's owners equally and should provide some relief to the debt-heavy agency.
Mon, Mar. 7, 11:50 AM
- Sprint (NYSE:S) is up 5.9% today in the wake of a reorganization plan from its parent, SoftBank (OTCPK:SFTBY +3.6%).
- The move to separate into two firms, domestic and international, puts SoftBank's ownership of Sprint into the side with its holdings of Alibaba among overseas operations. That's the side that Nikesh Arora (heir apparent to SoftBank chief Masayoshi Son) will run.
- The domestic side, run by Ken Miyauchi, will cover the domestic mobile business, including the company's investment in Yahoo Japan. Son will remain in control of both companies.
- While domestic mobile profits have helped fund efforts to turn around Sprint, the reorg is largely internal, since SoftBank will be the single listed company and earnings won't be separated out among the two.
- With a reorg in place, eyes now turn to whether SoftBank will take a writedown on its $21.6B acquisition of the Sprint stake.
- Last week, details emerged about a network-leasing financing scheme at SoftBank that will inject some $3B-$5B of capital into Sprint with wireless equipment and spectrum as collateral.
- Previously: Laden with debt, Sprint turning to spectrum (and SoftBank) to secure cash (Mar. 02 2016)
Wed, Mar. 2, 7:35 PM
- Sprint's (S +7.9%) latest plan to revive a flagging business? A network-leasing unit at owner SoftBank (OTCPK:SFTBY), which would supply the carrier with loans collateralized by wireless equipment -- and some of its spectrum rights.
- That's the "crown jewel," and SoftBank had already previously set up a unit to buy (and lease back) Sprint's phone inventory for $1.2B.
- The spectrum rights (estimated at north of $115B in value) aren't going anywhere, but Sprint will pursue $3B-$5B from related loans this year. That's against $34B in debt, more than twice Sprint's market value.
- Sprint has elected to sit out the upcoming FCC broadcast incentive auction for airwaves. But then it's in a cash crunch, and already sitting on the biggest piece of 2.5 GHz spectrum in the country. So far, ambitions to apply that to creating the fastest wireless network are unrealized.
- Drawing some billions from its spectrum is getting closer to a last resort as Sprint buys time for a network turnaround. “I don’t think Sprint will go belly-up. Masa would probably be there to bail them out,” says Recon Analytics analyst Roger Entner. “But it shows what kind of bind Sprint is in, when you have to collateralize the plates and silverware.”
- Shares in Sprint closed at a 2016 high today, and are up 35% over the past month.
- Related: Sprint's Spectrum Is Worth A Premium, Not A Discount (Mar. 02 2016)
- Related: Sprint: Still A Terminal Short (Mar. 02 2016)
- Related: Run, Don't Walk Away From Sprint (Jan. 26 2016)
Mon, Jan. 25, 3:48 PM
- A morning of solid gains has slipped away with Sprint (NYSE:S) falling into the close, -11.2%, on news that it's cutting 2,500 jobs.
- That amounts to about 7% of total staff, and is its third round of reductions in less than two years. The moves had largely been expected by this week as Sprint pursues $2.5B in cost cuts.
- The cuts will come mostly to customer-care staff, and Sprint will close several call centers.
- SoftBank (OTCPK:SFTBY) is off 2.8% in late U.S. trading. Its shares had closed up 2.4% in Tokyo on Monday -- logging its biggest intraday rally since spring 2014 -- after Sprint's note that it would release earnings tomorrow (a week earlier than expected) to assuage investor concerns about its decline. Sprint has fallen 31% already in 2016 and is down 47% over the past three months.
- Previously: Sprint moves Q4 earnings report a week earlier to settle concerns (Jan. 21 2016)
- Previously: SoftBank hurting as Sprint shares, debt hit multiyear lows (Jan. 20 2016)
Wed, Jan. 20, 8:02 PM
- With Sprint (NYSE:S) taking another hit today, down 7.6% for its third straight losing session, owner SoftBank (OTCPK:SFTBY) is feeling the pain as well -- down 7.7% and on its own third straight day of declines.
- Shares of SoftBank fell for the fourth straight day in Tokyo, to its lowest level since April 2013, and Sprint is at its lowest level in more than two years.
- Sprint debt is taking a hit; its bonds led junk debt in declines today, with 7% bonds due 2020 dropping 8.25 cents on the dollar to 60.75 cents.
- SoftBank has said it may take a charge of up to $1.2B in its next earnings report.
- After hours: OTCPK:SFTBY -2.8%; S -0.8%.
Fri, Jan. 15, 12:48 PM
- SoftBank (OTCPK:SFTBY -2.7%) earned an upgrade to Buy from HSBC after the company said it would launch a lower-priced wireless plan option for light smartphone users -- a move in response to government pressure.
- Late last summer, Japan's government argued that wireless service was too expensive. SoftBank's new plan, starting in April, is to sell a data plan for ¥4,900/month (about $42; nearly 25% lower than its cheapest plan) for users who use less than 1 GB/month in data and make frequent but short (under 5 minute) phone calls, which would be unlimited.
- The new plan "should address a regulatory requirement without significantly impacting profits," says HSBC's Neal Anderson. He added, though, that struggling Sprint is the "key obstacle to a re-rating in SoftBank stock."
- Over-the-counter shares of SoftBank are caught up in the U.S. market downdraft, but the stock closed up 0.5% in Tokyo trading.
Nov. 24, 2015, 7:52 PM
- SoftBank (OTCPK:SFTBY -1.6%) last month declared a plan to spread "several billions" each year in investments around the world, all set to be managed by president (and likely successor to Chairman Masayoshi Son) Nikesh Arora -- who certainly seems to prefer options in India over pouring more money into struggling Sprint (S +0.9%).
- In an interview with Bloomberg on his strategy, Arora says that while they're focusing on later-stage startups with proven products, there's "money to be made in any stage, as long as you identify the right company."
- While there are some 150 companies valued over $1B, Arora says there are about 1,000 companies over $500M: "That’s our universe. We believe with 1,000 companies we can interpret this universe and understand it with limited resources."
- He says the best thing they can offer startups is "operational insights," rather than investment strategy or fund-raising help.
- As for SoftBank trading at a discount to public assets: "There are three things that people worry about. One is what’s going to happen to Sprint. Two is what’s going on in China. And three is I hope Masa won’t do another Sprint." But as for Sprint, "Masa is unrelenting. He is working with [Sprint managers] almost every night for a few hours, 10 p.m. calls, or in the morning."
- Previously: SoftBank planning "several billions" in annual global investment (Oct. 22 2015)
- Previously: Sprint to target 'bloated' structure with $2.5B in cost cuts (Oct. 09 2015)
Industry: Information Technology Services
Other News & PR