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Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>Softbank's surprise announcement of a buy-back/de-leveraging program should continue to be well received and we expect that today's limit-up 19% gain can be followed by further upside tomorrow.  As opposed to the one announced ten days ago, Softbank's current buyback will be funded by selling assets that the market is discounting at 60%+ for full price, whilst de-leveraging should mitigate worries on balance sheet stress as private equity valuations fall. Memories from the collapse of the dot-com bubble and the Vodafone Japan/Lehman shock time were likely revived by a 53% share price decline in five weeks and whilst Softbank has been reluctant so far, this is the first time it had the financial firepower from its Alibaba investment to wield. That is likely what they sell to fund this program although monetization of the Sprint/TMUS shares is also possible. </p>

Softbank's surprise announcement of a buy-back/de-leveraging program should continue to be well received and we expect that today's limit-up 19% gain can be followed by further upside tomorrow.  As opposed to the one announced ten days ago, Softbank's current buyback will be funded by selling assets that the market is discounting at 60%+ for full price, whilst de-leveraging should mitigate worries on balance sheet stress as private equity valuations fall. Memories from the collapse of the dot-com bubble and the Vodafone Japan/Lehman shock time were likely revived by a 53% share price decline in five weeks and whilst Softbank has been reluctant so far, this is the first time it had the financial firepower from its Alibaba investment to wield. That is likely what they sell to fund this program although monetization of the Sprint/TMUS shares is also possible. 

Softbank Group: Implications of an Unprecedented Buyback and Asset Sale Program