Japanese conglomerate SoftBank Group announced a massive strategic move on Monday, sending investors into a frenzy. The company revealed that it plans to sell up to $41 billion worth of assets to buy back shares and to secure its finances during the global health and economic crisis.
The announcement of the plan resulted in the company's stock had its best trading day in more than a decade. SoftBank's share prices had surged by more than 18.6 percent in Tokyo following the announcement, the stock's largest daily percentage jump since 2008.
SoftBank announced that it plans to sell or liquidate up to $41 billion worth of its assets, which it will use to repurchase up to $18 billion worth of its stocks. When completed, it will be the second major buyback made by the company this year.
The rest of the funds will be used to pay off a part of the company's debts, while also buying back bonds. According to the company, the strategy should greatly improve its cash flow moving forward. The surge in the company's stock prices somewhat makes up for the massive drops it had experienced over the past year following the failed investments made by its $100 billion Vision Fund.
Since last year, the company lost nearly half of its market valuation after the string of embarrassing losses. Its position was further worsened after it reported lower-than-expected profits for its fourth quarter last year, which was mainly due to its bad investments in startups such as Uber and WeWork.
The recent spread of the novel coronavirus has also managed to negatively affect the company's global business. Since the start of the year, the company's stock prices have plummeted by more than 30 percent.
In a statement that was published by the company on Monday, it stated that it believes that its shares are substantially undervalued. The company added that it will be moving forward with the liquidation of its assets to shore up its finances in an attempt to get it back up on its feet.
The company has been trying to get its tumbling shares under control. Earlier in the month, the company announced that it would be buying back up to $4.5 billion worth of its stock. The move is aimed at enhancing shareholder returns and as a measure to stabilize its valuation. Combined with its most recent announcement, SoftBank will essentially be buying back around 45 percent of its shares.
SoftBank CEO Masayoshi Son stated that the buyback programs they have launched will result in the largest increase in cash balance in the history of the company. Son added that the strategy should strengthen its balance sheet and reduce its debt, allowing the company to recover from its previous losses.
