Masayoshi Son’s SoftBank Group shares jumped 5% on Wednesday after the Japanese tech conglomerate said it would receive shares in telco T-Mobile U.S. worth some $7.59 billion at no additional cost. SoftBank shares rose its most since June after snagging roughly $7.6 billion worth of stock in T-Mobile U.S. Inc.. This transaction was part of an agreement struck when the wireless carrier merged with rival Sprint Corp. in 2020.
Softbank T-Mobile transaction
Masayoshi Son’s Softbank said late on Tuesday it had told T-Mobile U.S. to issue 48.75 million shares in common stock to it after conditions set out in an agreement made as part of the merger of SoftBank’s U.S. telco Sprint and T-Mobile were met.
The transaction bolsters the listed assets in SoftBank’s portfolio, doubling its T-Mobile U.S. stake to 7.64% from 3.75% currently, following the blockbuster listing of chip designer Arm in September.
“This increases the proportion of listed, measurable equity in hand on (SoftBank Group’s) balance sheet, and, even better, proportions of marginable equity relative to indebtedness,” Macquarie analyst Paul Golding wrote in a client note.
The infusion of stock is likely to improve SoftBank’s balance sheet, while potentially presenting a pool of new capital to tap.
Sprint T-Mobile merger
The merger of Sprint with T-Mobile was one of the industry’s largest-ever deals, worth around $37 billion. SoftBank has this year gradually raised capital and revved up its pace of investment, anticipating better market conditions in 2024. Masayoshi Son is seeking out bets on AI and autonomous driving, seeking to burnish the firm’s reputation after a series of high-profile missteps in past years.
SoftBank stock update
SoftBank’s shares have gained only around 14% year-to-date, compared with an almost 30% rise in the benchmark index. The group trades at a discount of around 45.5% to the value of its assets, according to Macquarie calculations.
Masayoshi Son’s investments
Masayoshi Son has been a leading investor in late stage startups but has suffered a series of reversals including the bankruptcy of office-sharing firm WeWork, which was once the most valuable U.S. startup.
The T-Mobile U.S. transaction bumps SoftBank’s internal rate of return on its Sprint investment to 25.5%.
Other positives for the company include the recent rally in Arm’s shares, which closed on Tuesday around 44% above the initial public offering price.
