Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Softbank Group shares jumped 5% on news the company is mulling a “slow burn” buyout which apparently consists of ongoing buybacks until CEO Son’s current holdings are enough to squeeze out minorities. At the current share price, which would likely be impossible to maintain absent a market selloff, Softbank could just barely get that done with cash from recent asset sales but there would be no money left over for further investments. We think this is unlikely but a steady buyback policy would be great news in itself.

Softbank Group shares jumped 5% on news the company is mulling a “slow burn” buyout which apparently consists of ongoing buybacks until CEO Son’s current holdings are enough to squeeze out minorities. At the current share price, which would likely be impossible to maintain absent a market selloff, Softbank could just barely get that done with cash from recent asset sales but there would be no money left over for further investments. We think this is unlikely but a steady buyback policy would be great news in itself.

Softbank Group - Slow Burn Buyout Unlikely but Helps with the Discount so that Is Good

Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

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<a href="https://www.smartkarma.com/entities/the-we-company" target="_blank" data-smartkarma-citation="entities:28061:1" rel="noopener">The We Company (WeWork) (WE US)</a> sold its majority stake in its China business to <a href="https://www.ft.com/content/153f2775-72cc-451e-b7a3-03978c69f97b" target="_blank" rel="noopener">Trustbridge Partners</a> for $200 million, a price far below the $5 billion where the unit had been valued in 2018.But in 2018, WeWork was still being pitched by its bankers to investors as worth as much as $100 billion, substantially higher versus my $5-7 billion estimate. Less than a year later WeWork's IPO collapsed and it sunk into insolvency as I had projected (see <a href="https://www.smartkarma.com/insights/gravity-works-as-wework-doesn-t-now-plan-b" target="_blank" data-smartkarma-citation="insights:32107" rel="noopener">Gravity Works As WeWork Doesn't; Now Plan B</a> on 9/17/20). We know how that worked out. Times and fortunes have changed for the worse since then, and now WeWork is lucky to get a meaningful price for any of its still struggling assets, as we can see in the following quick review.Read on as Bond Angle discussion continues...

The We Company (WeWork) (WE US) sold its majority stake in its China business to Trustbridge Partners for $200 million, a price far below the $5 billion where the unit had been valued in 2018.But in 2018, WeWork was still being pitched by its bankers to investors as worth as much as $100 billion, substantially higher versus my $5-7 billion estimate. Less than a year later WeWork's IPO collapsed and it sunk into insolvency as I had projected (see Gravity Works As WeWork Doesn't; Now Plan B on 9/17/20). We know how that worked out. Times and fortunes have changed for the worse since then, and now WeWork is lucky to get a meaningful price for any of its still struggling assets, as we can see in the following quick review.Read on as Bond Angle discussion continues...

Breaking: WeWork Nets $200 Million for China Business

Sold! Softbank is said to be closing in on a deal to sell <a href="https://www.smartkarma.com/entities/arm-holdings-plc" target="_blank" rel="noopener">Arm Holdings (ARM LN)</a> to <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" rel="noopener">NVIDIA Corp (NVDA US)</a> for more than $40 billion in cash and stock in a deal that could be announced as soon as Monday, according to reports out today by <a href="https://www.wsj.com/articles/softbank-nearing-deal-to-sell-arm-holdings-to-nvidia-for-more-than-40-billion-11599928360?mod=hp_lead_pos1" target="_blank" rel="noopener">The Wall Street Journal</a> and <a href="https://www.ft.com/content/6bfe40a5-2426-4743-98cd-6fed9dd01b98" target="_blank" rel="noopener">Financial Times</a>.
This finally may be some good news for Softbank's investors, shaken by news last week that it had launched a <a href="https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2" target="_blank" rel="noopener">massive options program so large it helped move markets</a> on stocks it just bought. 
This was funded with cash Softbank had said it must protect against conditions too risky to allow it to execute promised stock buybacks and debt repayment to repair its damaged balance sheet (read more in <a href="https://www.smartkarma.com/insights/softbank-s-son-feeling-the-force-with-options-funded-with-cash-it-had-pledged-to-protect" target="_blank" rel="noopener">Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect</a> on 9/8/20).
I warned last week Softbank had deliberately withheld and misrepresented material information about such a dramatic change in strategy direction and risk in its earnings presentation to investors just weeks ago.
On Saturday, Softbank's top investors went straight to the top to find out why—the answer is troubling, but not surprising.
<div class="content-highlight">
Read on for Bond Angle commentary.
</div>

Sold! Softbank is said to be closing in on a deal to sell Arm Holdings (ARM LN) to NVIDIA Corp (NVDA US) for more than $40 billion in cash and stock in a deal that could be announced as soon as Monday, according to reports out today by The Wall Street Journal and Financial Times.
This finally may be some good news for Softbank's investors, shaken by news last week that it had launched a massive options program so large it helped move markets on stocks it just bought. 
This was funded with cash Softbank had said it must protect against conditions too risky to allow it to execute promised stock buybacks and debt repayment to repair its damaged balance sheet (read more in Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect on 9/8/20).
I warned last week Softbank had deliberately withheld and misrepresented material information about such a dramatic change in strategy direction and risk in its earnings presentation to investors just weeks ago.
On Saturday, Softbank's top investors went straight to the top to find out why—the answer is troubling, but not surprising.

Read on for Bond Angle commentary.


Softbank Wrapping up Arm Sale While Wrestling With Alarmed Investors

<a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> was revealed on Friday as the massive NASDAQ whale helping to drive unprecedented option volume in recent weeks with its multi-billion dollar call-buying spree in the biggest tech names, as reported by <a href="https://www.ft.com/content/75587aa6-1f1f-4e9d-b334-3ff866753fa2" target="_blank" rel="noopener">Financial Times</a> and <a href="https://www.wsj.com/articles/softbanks-bet-on-tech-giants-fueled-powerful-market-rally-11599232205" target="_blank" rel="noopener">The Wall Street Journal</a> which confirmed speculation Thursday by <a href="https://www.zerohedge.com/markets/speculation-emerges-over-identity-mystery-marketwide-call-buyer" target="_blank" rel="noopener">Zero Hedge</a>.Softbank's option trades added to $40 billion in call-buying over the past month traced to retail investors. The resulting frenzy netted Softbank <a href="https://www.ft.com/content/53aa19bb-fc9a-46fd-aafd-4bc3669ab161" target="_blank" rel="noopener">$4 billion in option trading gains—on paper—</a>on its own <a href="https://www.wsj.com/articles/softbanks-bet-on-tech-giants-fueled-powerful-market-rally-11599232205" target="_blank" rel="noopener">$50 billion notional exposure</a>. By comparison, Softbank's newly acquired long positions in <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a>, <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a>, <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a>,  and <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> are worth just <a href="https://www.ft.com/content/3eec59a3-cb51-487c-aacd-68a0c7e46f2f" target="_blank" rel="noopener">$2 billion</a>, almost all that's left of the $10 billion Softbank spent late in the June quarter buying and selling mostly tech stocks at heady prices. Those holdings now are also subject to sharp declines triggered when Softbank's option scheme was revealed. Sure enough, Softbank <a href="https://www.ft.com/content/9e5827e9-893a-453e-b28d-88c1c0adc9d5" target="_blank" rel="noopener">lost $9 billion in market value</a> on Monday.There's plenty of intense scrutiny underway to understand these trades and what their impact ultimately proves to be. I'm more interested in Softbank's drastic change in strategy and its alternative deployment of cash from $40 billion raised in stock fire sales forced by its wary banks and legacy mega-investors who cut him and Softbank off after decades of seemingly endless billions in available funding when his recklessness netted Softbank and Vision Fund tens of billions of dollars in record losses. This certainly is not what Softbank told investors to expect mere weeks ago.Instead, Softbank's actions signal arrogance, or desperation, or worse—that CEO Masayoshi Son feels unrestrained and back in his Star Wars Zone with $40 billion in fresh cash.<div class="content-highlight">Read on for a Bond Angle deep dive into the belly of Softbank, The Whale, and what Son feels free to do with its $40 billion in cash that was pledged to bolster Softbank's bloodied balance sheet.</div>

Softbank Group (9984 JP) was revealed on Friday as the massive NASDAQ whale helping to drive unprecedented option volume in recent weeks with its multi-billion dollar call-buying spree in the biggest tech names, as reported by Financial Times and The Wall Street Journal which confirmed speculation Thursday by Zero Hedge.Softbank's option trades added to $40 billion in call-buying over the past month traced to retail investors. The resulting frenzy netted Softbank $4 billion in option trading gains—on paper—on its own $50 billion notional exposure. By comparison, Softbank's newly acquired long positions in Amazon.com Inc (AMZN US), Alphabet Inc Cl C (GOOG US), Microsoft Corp (MSFT US),  and Tesla Motors (TSLA US) are worth just $2 billion, almost all that's left of the $10 billion Softbank spent late in the June quarter buying and selling mostly tech stocks at heady prices. Those holdings now are also subject to sharp declines triggered when Softbank's option scheme was revealed. Sure enough, Softbank lost $9 billion in market value on Monday.There's plenty of intense scrutiny underway to understand these trades and what their impact ultimately proves to be. I'm more interested in Softbank's drastic change in strategy and its alternative deployment of cash from $40 billion raised in stock fire sales forced by its wary banks and legacy mega-investors who cut him and Softbank off after decades of seemingly endless billions in available funding when his recklessness netted Softbank and Vision Fund tens of billions of dollars in record losses. This certainly is not what Softbank told investors to expect mere weeks ago.Instead, Softbank's actions signal arrogance, or desperation, or worse—that CEO Masayoshi Son feels unrestrained and back in his Star Wars Zone with $40 billion in fresh cash.Read on for a Bond Angle deep dive into the belly of Softbank, The Whale, and what Son feels free to do with its $40 billion in cash that was pledged to bolster Softbank's bloodied balance sheet.

Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

As Tesla chooses the “unusual” option of conducting equity financing through an At The Market offering we think it is an apt time to take a trip down memory lane and examine some of the qualitative similarities of the company’s culture and situation with one of the previous companies that was going to change the world and disrupt all those who just didn’t get it… Enron.

As Tesla chooses the “unusual” option of conducting equity financing through an At The Market offering we think it is an apt time to take a trip down memory lane and examine some of the qualitative similarities of the company’s culture and situation with one of the previous companies that was going to change the world and disrupt all those who just didn’t get it… Enron.

United States

WeWork Inc. provides co-working spaces for individuals and entrepreneurs. The Company offers private offices, office suites, headquarters, and custom build out options to fit a variety of office needs, as well as desk spaces and conference rooms. WeWork serves customers worldwide.

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WeWork (WEWKQ US)

Softbank Group - Slow Burn Buyout Unlikely but Helps with the Discount so that Is Good

Softbank shares jumped 5% on news it is mulling a “slow burn” buyout which consists of ongoing buybacks without a formal offer. This seems unlikely...

Kirk Boodry

Breaking: WeWork Nets $200 Million for China Business

The We Company (WeWork) (WE US) is lucky to get $200 million for its China business, in my view, even though it had been valued at $5 billion back...

Vicki Bryan

Softbank Wrapping up Arm Sale While Wrestling With Alarmed Investors

Sold! Softbank has agreed to sell Arm Holdings (ARM LN) to NVIDIA Corp (NVDA US) for more than $40 billion in cash and stock in a deal that could...

Vicki Bryan

Softbank's Son "Feeling The Force" With Options Funded With Cash It Had Pledged To Protect

The market is eager to know what Softbank plans to do with a burgeoning war chest from bigger and bigger stock sales. The better question is why...

Vicki Bryan

Tesla – A Comparison With Enron

As Tesla chooses the “unusual” option of conducting equity financing through an At The Market offering we think it is an apt time to take a trip...

Mio Kato

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