Japanese conglomerate SoftBank Group Corp. has seen a 5% surge in its share price following the announcement that it will receive shares in U.S. telco T-Mobile US Inc. worth approximately $7.59 billion at no additional cost. The move comes as part of an agreement linked to the merger of SoftBank’s other U.S. telecom investment Sprint and T-Mobile.
As conditions outlined in the merger agreement were met, SoftBank asked T-Mobile to issue 48.75 million shares in common stock. This transaction has doubled SoftBank’s stake in T-Mobile US from 3.75% to 7.64%. Analysts note that this contributes to an increase in the proportion of listed, measurable equity on SoftBank’s balance sheet.
SoftBank’s shares experienced their most significant gain in over a month, although the conglomerate has seen only a 14% rise year-to-date compared to the nearly 30% increase in the benchmark index.
The move is seen as a tactical financial decision by SoftBank, particularly as it grapples with a discount of around 45.5% to the value of its assets. The conglomerate, led by Masayoshi Son, has faced challenges in recent years, including setbacks like the bankruptcy of office-sharing firm WeWork and a near complete failure of its mega Vision Fund bets on startups globally, particularly in India.
The transaction with T-Mobile also has a positive impact on SoftBank’s internal rate of return (IRR) on its Sprint investment, bumping it to 25.5%. Additionally, the recent rally in Arm’s shares, closing around 44% above the initial public offering price, adds to the favourable conditions for SoftBank.
Yesterday, SoftBank had also executed the sale of shares worth $310 million in omnichannel retailer FirstCry. This manoeuvre comes ahead of FirstCry’s anticipated Initial Public Offering (IPO), with the company likely to file a draft paper for the IPO later this week. SoftBank’s sale, valued at around Rs. 630 crore, positions the retailer in the range of $3.5-3.75 billion, affirming the conglomerate’s intent to unlock value from its investments.
Having initially invested $400 million in FirstCry at an enterprise valuation of $900 million, SoftBank is divesting its shares in tranches, and it still holds shares valued in the range of $800-900 million, planning additional sales later. This move aligns with SoftBank’s ongoing efforts to optimise its investment portfolio and capitalise on the rising market conditions expected in 2024.
