SoftBank Co. had started May 2019 with hopes in its eyes and money in its pocket. Investments in technology startups like Oyo, Uber and WeWork had lead the conglomerate to post its highest ever operating profit, with Masayoshi Son stating, “Our time has finally come.” However, what followed was nothing short of a dead rubble, (literally and figuratively) and has led SoftBank to expect historical losses and buying back its own shares to stop its shares from tanking.
Uber’s poor performance in its initial public offering in May was followed by WeWork’s implosion in September. OYO isn’t in good shape either, as the already struggling business continues to take hits from coronavirus and a lack of confidence from partnering hotel owners.
Softbank’s “Vision” fund, which made up for more than half of the profits of the company an year ago, leading to Masayoshi announcing plans for a successor worth $108 billion, plummeted and swung to a record 1.8 trillion yen loss. All of this, along with the legal debacle with WeWork after SoftBank backed out off a commitment to save the office sharing startup, has lead to Masayoshi Son watching helplessly as SoftBank expects to post 1.35 trillion yen in operating losses for the fiscal year ending on March 31, next week.
Now, with the Vision Fund 2 almost cancelled, startups tanking and bets failing all around the table, SoftBank has been left with no choice but to buy back its own shares to support its dying stock portfolio. The company has already spent $2.3 billion for this endeavour, and has bought back 58,648,400 of its own stock as of April 30. The plan, which is expected to be in place till next March, will see the company buying back 145 million stocks for a total of 500 billion yen. Thus, Softbank is only half way done.
The buy back, which was first announced in March, failed to provide any sort of boost to the stocks. In fact, the stocks kept declining a week into the announcement, leading to Son announcing an unexpected second buyback plan for 2 trillion yen. This, along with SoftBank’s announcement to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt, caused the stocks to take a 70% jump.
Thus, now the company is burning through capital and assets to buy back its own stocks so it can survive to battle another day. However, with the company’s own losses swinging to about 900 billion yen, that day isn’t promised any time soon.