SoftBank CEO Masayoshi Son attends a news conference in Tokyo, Japan, on November 5 2018. Picture: REUTERS/KIM KYUNG-HOON
SoftBank CEO Masayoshi Son attends a news conference in Tokyo, Japan, on November 5 2018. Picture: REUTERS/KIM KYUNG-HOON

Tokyo — SoftBank has won approval to conduct a ¥2.4-trillion initial public offering (IPO) of its domestic telecoms business, in a deal that will seal the group’s transformation into a top global technology investor.

The IPO will be one of the biggest ever worldwide, and will provide the group with funds to pay down debt and continue placing big bets on innovations that CEO Masayoshi Son predicts will drive future tech trends.

SoftBank’s bets so far have been as varied as small gaming startups, ride-hailing firms such as Uber Technologies, and e-commerce behemoth Alibaba.

SoftBank aims to raise ¥2.4-trillion through the sale of 1.6-billion SoftBank shares at a tentative price of ¥1,500 each, showed a filing with the finance ministry on Monday.

The amount could rise by ¥240.6bn if demand triggers an over-allotment, taking the total closer to the $25bn that Alibaba raised in 2014 in the biggest-ever IPO.

The final IPO price will be determined on December 10, and SoftBank will list on the Tokyo Stock Exchange on December 19 with an initial market value of ¥7.18-trillion — about ¥1-trillion above that of rival KDDI, which has about 10-million more subscribers.

The parent will retain a stake of around two-thirds, depending on the over-allotment.

Growth in question

The mammoth offering comes at a time when investors have begun questioning the outlook for Japan’s telecoms companies.

The IPO was initially expected to appeal to investors seeking stability, but the government has recently called on carriers to lower fees while backing more wireless competition, sending shockwaves through the industry.

Yet SoftBank’s brand name is still likely to draw retail investors long accustomed to using SoftBank’s phone and internet services. Many still see CEO Son as a tech visionary who challenged entrenched rivals NTT DoCoMo and KDDI, and brought Apple’s iPhone to Japan.

Japanese households are commonly seen as an attractive target in IPOs with their ¥1,829-trillion in financial assets, even if they are traditionally risk-averse with over 50% of assets in cash and deposits.

More than 80% of the shares will be offered to domestic retail investors, a person with knowledge of the matter told Reuters.

“I think a reasonable amount of money will be attracted to this one,” said Tetsutaro Abe, an equity research analyst at Aizawa Securities. “It’s a mobile company so the cash flow is steady. If you think about future yield and shareholder returns, it’s a far more attractive investment than government bonds.”

SoftBank hopes that putting a value on the telecoms business will help bolster its own share price, which it sees as undervalued.

Son in June argued that even without the domestic telecoms business, SoftBank shares should be worth over ¥14,000 — almost 40% over their current price — considering the value of its investments in Alibaba, Arm Holdings, Sprint and Yahoo Japan, as well as Vision Fund.

Investors have grown nervous about the lack of clarity in some of the investments by the $90bn Vision Fund. They have also been worried about the fund’s dependence on Saudi Arabia, its biggest backer, following the murder of a journalist by Saudi security officials.

Its shares closed mostly flat on Monday at ¥8,777, down more than 20% since the killing in early October.

US credit-rating firm S&P Global Ratings said the IPO was credit positive for the parent, saying it expects a bulk of the proceeds to be used to repay debt. The group’s interest-bearing debt was nearly ¥18-trillion at end-September.

Nomura, Mizuho, Deutsche Bank, Goldman Sachs, JP Morgan and SMBC Nikko are joint global co-ordinators for the IPO.