SoftBank Group's shares surged by around 10% Tuesday following an announcement that it would be buying back shares worth up to $8.8 billion. The move to buy back roughly 15% of its shares comes after the company reported a loss for its latest quarter.
The company attributed its quarterly earnings loss to the decline in shares prices of its portfolio - particularly those in China, which had been affected by the nation's sweeping regulatory crackdown.
SoftBank's net assets fell $57 billion to $187 billion as a result of the drop in the Chinese e-commerce stock amid the broader regulatory backlash in China. Chief Executive Masayoshi Son stated that its portfolio in China is a key gauge of the company's performance.
Due to the fall in the value of major public holdings, including China's Didi Global Inc. and Korea's Coupang Inc., SoftBank announced a record loss of its Vision Fund for the second fiscal quarter. The investment arm lost $7.31 billion in the second quarter, while the corporation as a whole lost $3.49 billion.
Since its inception in 2017, Son's Vision Fund has been an unpredictable provider of profit and loss. In the most recent quarter, the unrealized loss on public company valuations was $17.7 billion across SoftBank's two Vision Funds. Coupang was accountable for the loss of $6.7 billion.
The surge is SoftBank's highest gain in two months. The buyback was somewhat expected as the company had employed a similar strategy last year. A $22 billion buyback program helped raise SoftBank's valuation from its epidemic low last year. However, once the repurchase program expired, the company's stock had dropped by more than 40% from its peak in mid-March.
Son had been approached several times about resuming its buyback program but had declined since SoftBank had other priorities for its capital, including making major investments in startup companies. The company's board finally approved the current plan since SoftBank's stock had fallen so far below the value of its assets.
The buyback program is expected to last until Nov. 8, 2022, but the company said it could be extended if the program isn't completed by that time.
