SoftBank IPO's weak debut is still a win for technology titan Masayoshi Son
- The IPO was a victory for Son, who is amassing more cash to bet on new enterprises even in the middle of the Topix stock index’s worst year since 2011
Masayoshi Son raised 2.65 trillion yen (US$23.6 billion) by pulling off the world’s second-largest initial public offering ever. Investors were not so lucky.
SoftBank Corp., the Japanese telecommunications business of the billionaire’s technology empire, dropped 14.5 per cent to 1,282 yen at the close in Tokyo on Wednesday, hurt by concerns over an impending price war that could hit profits. That is the biggest decline for a major IPO since Japan Display’s flop in 2014. Of those who bought at the offered price of 1,500 yen, 90 per cent were individuals; the rest were money managers.
The IPO was a victory for Son, who is amassing more cash to bet on new enterprises even in the middle of the Topix stock index’s worst year since 2011. A network outage just before the sale spooked investors, as did Rakuten’s planned entry into Japan’s 7 trillion yen wireless market. But by getting individuals to buy into the offering with an attractive yield, Son was able to raise funds even though future profitability remains a big question, according to Chris Lane, an analyst at Sanford C. Bernstein & Co.
“The backdrop is incredibly negative. To sell something with a price at this level is converting lead into gold,” Lane said. “Like in all transactions, there is a buyer and a seller. In this case, SoftBank Group is the seller and I think that they have sold well.”
That was reflected in the shares of SoftBank Group Corp, which still holds about two-thirds of the domestic phone unit and saw its shares decline by less than 1 per cent on Wednesday. Cash from the IPO will give Son the ability to make further investments in global technology companies through the US$100 billion Vision fund, a portfolio that already includes Uber Technologies and WeWork.
Still, the decline in the new SoftBank listing puts it just behind Japan Display’s weak market debut in 2014, Japan’s worst major IPO in at least a decade. It was clear from the beginning that SoftBank and its underwriters – Nomura Holdings, Deutsche Bank, JPMorgan Chase & Co, Sumitomo Mitsui Financial Group, Mizuho Financial Group Inc. and Goldman Sachs Inc. – were determined to pull off the IPO at a high price.