By: Jess Smitnick
Insiders are saying that Paul Singer’s New York City hedge fund Elliott Management Corp. has collected a stake in SoftBank Group Corp. of close to $3 billion.
Singer, so the rumors go, sees SoftBank as highly undervalued, and is envisioning engineering a buyback of shares to the tune of $20 billion.
One way the company could do that would be by shaving investments in Alibaba Group Holding Inc. and Sprint Corp.
According to latimes.com, talks have been ongoing between Elliott and top executives at SoftBank, including of course Masayoshi Son. “The firm thinks SoftBank’s net asset value could be about $230 billion but that it trades at a huge discount because of concerns around its Vision Fund, as well as how the failed initial public offering of WeWork last year was handled,” the Times suggested. “SoftBank’s U.S.-traded shares jumped 12% on Thursday after the Wall Street Journal first reported the investment. They closed at $46.49 in New York, giving the company a market value of about $97 billion.”
“In a bullish cover story last July, before the WeWork debacle, Barron’s noted that SoftBank’s stake in China’s Alibaba Group Holding (BABA) was worth $116 billion, eclipsing SoftBank’s $100 billion market capitalization. Our sum-of-the-parts analysis appears to be how Elliott is approaching its SoftBank investment. The Journal article also raised the idea that SoftBank would buy back $10 billion to $20 billion of its stock in an effort to close the gap between its market capitalization and investment value,” Barron’s reported.
Although both sides have proclaimed a desire to keep relations friendly, “investors say Elliott’s demand that SoftBank buy back $20bn of shares, provide more transparency on the more than 80 companies it has invested in through its Vision Fund and make governance changes, sets up a clash between Mr Son, a man who has built his career on taking huge risks, and a fund that has defined modern activist investing,” according to ft.com.
Few in the investment community are willing to bet against Son, and with good reason. “SoftBank stock closed Friday in Tokyo up 7.1% after a report from the Wall Street Journal that hedge fund Elliott Management has over time acquired a $2.5 billion stake in SoftBank and is pushing for a stock buyback and governance changes, Forbes reported. “The surge lifted Son’s net worth by $1.2 billion to $21.6 billion as of the market close on Friday in Japan. The 63-year-old owns slightly over a quarter of SoftBank and is the second-richest person in Japan behind Tadashi Yanai, founder of Uniqlo parent company Fast Retailing.”