SoftBank’s Son takes succession seriously but not enough to let go

Masayoshi Son is not letting go of the reins at SoftBank Group anytime soon, even as the founder tells shareholders he is taking the issue of his succession seriously.

Son, who has often indicated he plans to find his replacement in his 60s, may stay on as the chair into his 70s, the billionaire told shareholders during their annual meeting Wednesday. Son may relinquish the CEO title and hopes to have an idea of who his successor will be at about 69. For now, the 63-year-old CEO, unusually wearing reading glasses during his presentation, said he feels energised “thanks to advanced medical technology”.

Coming up with a plan for who would succeed Son is SoftBank’s biggest challenge, according to Yuko Kawamoto, who just stepped down as director after one year on the job. She had been the first female board member for the conglomerate and shareholders approved the appointment of another, Koei Tecmo Holdings chair Keiko Erikawa, at the meeting.

Investors also asked about plans for more share repurchases and the possibility of taking the company private through a slow-motion management buyout.

Son declined to comment on the prospects of a buyout. SoftBank has discussed the idea of such a buyout, Bloomberg News reported in December. If put into action, the plan would have the company buy back and cancel its own shares and thereby push up the percentage that Son himself owns.

“Many things are possible, but it’s hard to comment on it. I shouldn’t comment on it. No comment,” Son said.

SoftBank in May reported the largest quarterly net income ever for a Japanese company, propelled by e-commerce giant Coupang’s $4.6bn initial public offering (IPO). Yet the Japanese company’s shares have languished in the absence of another share buyback programme as SoftBank has maintained in years past, and Son has argued investors are not giving him credit for the value he is creating. The founder believes SoftBank Group shares are about 50% undervalued at present.

SoftBank’s stock is down almost 30% from its two-decade high in March. The steepest slide came in early May when SoftBank completed its unprecedented ¥2.5-trillion share buyback without announcing a new repurchase programme.

“With management, we always discuss buybacks as an important agenda item,” Son said. He added that it may come today, in three months or three years, but the decision “does require balanced thinking about a variety of aspects. Our financial status, our investment opportunity, how many targets are out there, of course we also need to consider the return to shareholders.”

While last year’s profits are largely paper gains on investments, Son has plenty of cash to keep buying back stock. The Japanese conglomerate had ¥6.75-trillion in cash and equivalents as of March 31, of which about ¥2-trillion yen are in short-term investments.

Son also said the company may consider a share split to make the stock more accessible to a broader range of investors. The shares were little changed at ¥7,714 in Tokyo on Wednesday.

Son has tried to keep the attention on his start-up successes. SoftBank’s Vision Fund investment arm has gone from being the source of the biggest loss in SoftBank’s history a year ago to the main driver of earnings, with a ¥2.3-trillion profit in the March quarter.

Coupang, the South Korean e-commerce leader, contributed $24.5bn to the Vision Fund profit in the fourth quarter. Auto1 Group, a German wholesale platform for used cars that went public in February, contributed $1.8bn of the gains while Uber posted a $200m loss. The Japanese conglomerate does not have to sell equity holdings to book income, so most of its profits are unrealised.

Son admitted that he needs to work harder to educate investors and win their confidence given SoftBank’s transformation in the past few years away from running technology businesses to an investment-holdings model. He said the best way to think of his sprawling conglomerate is as “a capital provider for the information revolution”.

“Investors make money. Capital providers make the future,” he said. “Venture capital seems too small for SoftBank. Vision capital is more like it.”

Bloomberg News. More stories like this are available on bloomberg.com