Lamseen – Japan SoftBank Group is anticipated to report a modest profit for the first quarter when it releases results on Wednesday. However, investor attention is likely to center on whether the technology investment firm will unveil a significant share buyback or signal its intention to initiate one.
The announcement comes during a period of significant market volatility. Particularly impacting large-cap Japanese stocks and major tech firms like SoftBank. These stocks have suffered due to the unwinding of yen carry trades and concerns about a U.S. recession. SoftBank’s shares fell nearly 20% on Monday but recovered almost half of those losses by Tuesday afternoon.
This year, SoftBank CEO Masayoshi Son has faced increasing pressure from investors to implement a share buyback program. As the company’s market capitalization is trading at a substantial discount to the aggregate value of its assets. Analysts estimate the discount to be around 60%, up from 53% at the end of March and 36% at the end of June 2023.
Activist investor Elliott Management has specifically advocated for a $15 billion share buyback after increasing its stake to over $2 billion. According to a source familiar with the situation in June. Other analysts have supported this suggestion. Noting that the current market turbulence has likely expanded the gap between SoftBank’s market value and its net asset value, further justifying a significant buyback.
Furthermore, SoftBank had $26 billion in cash as of the end of March. Rolf Bulk of New Street Research believes that SoftBank is well-positioned financially. And should consider a buyback program exceeding $10 billion.
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For the April-June period, SoftBank’s net profit is projected to be 109 billion yen ($748 million). Based on the average of five analyst estimates from LSEG and Reuters. This would represent its third consecutive quarter of profit, contrasting with a loss of 316.2 billion yen in the same quarter last year.
The investment giant, which holds a 90% stake in chip designer Arm, has been cautiously stabilizing its finances following setbacks from the failed office-sharing startup WeWork and a decline in the performance of its Vision Funds’ tech investments amid a high-interest-rate environment.
In the past two financial years, SoftBank has invested approximately $4 billion each year. Recently, it led a $1 billion funding round for British self-driving car startup Wayve. And acquired British AI chipmaker Graphcore for an undisclosed amount in July. Additionally, it invested $200 million in Tempus AI in April, which focuses on AI-driven precision medicine. Also announced a joint venture with Tempus in Japan the same month.
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