Japanese conglomerate SoftBank Group Corp. has seen a 5% surge in its share price following the announcement that it will receive shares in U.S. telco T-Mobile US Inc. worth approximately $7.59 billion at no additional cost. The move comes as part of an agreement linked to the merger of SoftBank’s other U.S. telecom investment Sprint and T-Mobile.
As conditions outlined in the merger agreement were met, SoftBank asked T-Mobile to issue 48.75 million shares in common stock. This transaction has doubled SoftBank’s stake in T-Mobile US from 3.75% to 7.64%. Analysts note that this contributes to an increase in the proportion of listed, measurable equity on SoftBank’s balance sheet.
SoftBank’s shares experienced their most significant gain in over a month, although the conglomerate has seen only a 14% rise year-to-date compared to the nearly 30% increase in the benchmark index.
The move is seen as a tactical financial decision by SoftBank, particularly as it grapples with a discount of around 45.5% to the value of its assets. The conglomerate, led by Masayoshi Son, has faced challenges in recent years, including setbacks like the bankruptcy of office-sharing firm WeWork and a near complete failure of its mega Vision Fund bets on startups globally, particularly in India.
The transaction with T-Mobile also has a positive impact on SoftBank’s internal rate of return (IRR) on its Sprint investment, bumping it to 25.5%. Additionally, the recent rally in Arm’s shares, closing around 44% above the initial public offering price, adds to the favourable conditions for SoftBank.
Read more at thetechportal.com
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