SoftBank Reveals $3.4 Billion Share Buyback Following Stock Decline

SoftBank has unveiled a $3.4 billion share buyback program in response to a sharp decline in its stock price amid a broader sell-off in Japanese and technology stocks.

The shares of the Japanese tech giant have plummeted by nearly a third in the last month due to escalating concerns about the high valuations assigned to artificial intelligence-focused investments.

This downturn has reduced SoftBank’s market capitalization to $73.1 billion, significantly below the company’s estimated net asset value of $170 billion. This discrepancy suggests that the company’s shares are trading at a 60% discount relative to the value of its holdings.

On Wednesday, SoftBank announced plans to repurchase up to 6.8% of its shares over the next year. This move follows calls from Elliott Management, an assertive activist investor reportedly holding over $2 billion in SoftBank shares, for such a buyback.

Yoshimitsu Goto, SoftBank’s Chief Financial Officer, commented, “We may consider implementing another share buyback program in the future. Shareholder returns are a constant focus of our board discussions.”

He emphasized that the buyback decision was made independently, stating, “SoftBank does not base its decisions on the influence of any single party.”

SoftBank is working on rebuilding its financial health following investments in struggling companies, notably a large investment in WeWork, which filed for bankruptcy.

The firm is now heavily investing in artificial intelligence technology, holding significant stakes in companies like Arm Holdings, the Cambridge-based chip designer.

The buyback news coincided with SoftBank reporting an unexpected net loss for the quarter ending in June.

The first-quarter loss amounted to 174.3 billion yen ($1.18 billion), about a third of the loss recorded in the same period the previous year. This figure sharply contrasted with consensus estimates predicting a profit of 104.7 billion yen, primarily due to higher taxes.

On another metric, net income, SoftBank registered a modest profit of 10.5 billion yen for the period.

Its Vision Fund investment arm reported an investment gain of 1.9 billion yen, a significant recovery from the 58 billion yen loss in the prior quarter.

Goto remarked that SoftBank is making investments with the anticipated era of artificial superintelligence in mind.

Recent acquisitions by SoftBank include Graphcore, a British AI chipmaker, purchased for an undisclosed amount. The company noted, “Evaluation of new technology often goes through cycles of hype and correction, eventually being appraised based on actual performance.”

SoftBank emphasized the application of generative AI across its portfolio, highlighting Klarna’s use of an AI assistant for customer service and ByteDance’s introduction of an AI chatbot in China.

Following the announcement, SoftBank’s shares surged $2.45, or 9.9%, to $27.16 on Wednesday morning in New York.