SoftBank happy with Elliott calling its stock undervalued
Activist investor Elliott Management has a 3% stake in the tech and banking conglomerate, whose shares closed 7% up on Elliott’s comments
Tokyo — On Friday, Japanese telco SoftBank’s CEO Ken Miyauchi welcomed hedge fund Elliott Management’s investment in parent SoftBank Group Corporation saying the activist investor’s assessment of the stock as undervalued is “positive”.
Elliott has built up a roughly 3% stake in the tech conglomerate and is pushing for changes to boost its value including strengthening corporate governance and share buybacks, sources said.
Elliott “thinks the company valuation is too low so in that sense it is currently a positive for SoftBank Group,” Miyauchi said, adding he believed corporate governance at the telco he heads was already strong.
SoftBank Group’s shares, which company executives think are chronically undervalued, closed up 7% on Friday after reports of the Elliot investment.
The comments came as SoftBank Corporation reported a 15% rise in third-quarter operating profit, beating estimates, underpinned by its mobile business. The company also raised its full-year operating profit forecast to ¥900bn ($8.19 bn) from ¥890bn previously.
Operating profit in the October-December quarter was ¥243bn compared to ¥211bn a year earlier. That compared with an average forecast of ¥240bn from three analyst estimates compiled by Refinitiv.
Japan’s third-largest telco, SoftBank Corporation has pledged to pay out 85% of its net income as dividends, providing a steady stream of cash to parent SoftBank Group, which holds a 67% stake.
Miyauchi said dividends, rather than share buybacks, are the priority.
Along with a 26% stake in China’s Alibaba, the wireless carrier continues to help to support the market value of its parent, which, in the quarter ended September, reported its first quarterly loss in 14 years as its tech bets faltered.
Founder Masayoshi Son built his fortune by breaking into Japan’s telecoms market but his reputation could be determined by the performance of the $100bn vision fund, which will report at the group’s results on Wednesday.
SoftBank Corporation rivals NTT Docomo and KDDI reported last week that operating profit fell 15% and rose 11%, respectively.
SoftBank’s stable earnings contrast with the fortunes of one of Son’s big early overseas bets, US wireless unit Sprint, which, last week, reported falling subscriber numbers.
Analysts said prospects for the money-losing telco are grim if it does not reach a merger with larger rival T-Mobile US .
Japan’s three incumbent telcos are holding their breath for the announcement of pricing plans from Rakuten, which will launch wireless services in April and is expected to offer aggressively low prices.
SoftBank’s shares closed up around 1% ahead of the earnings release.