By Sam Nussey
TOKYO (Reuters) – SoftBank Group Corp (T:9984) shares closed down almost 3% on Wednesday, extending this week’s slump that has wiped around $13 billion from its market capitalisation, as investors fretted about the conglomerate’s exposure to sliding U.S. tech stocks.
The fall takes SoftBank’s share decline to 10% since sources told Reuters and other media late last week that the Japanese company made big bets on equity derivatives tied to tech firms.
Chief Executive Masayoshi Son said last month SoftBank would place cash from an asset sale programme in public stocks but the complex transactions have caused jitters among retail investors in a company already widely viewed as opaque, analysts said.
The group “needs to protect Masa’s reputation by making sure it is not seen as a short-term trading giant, which would warrant a much bigger discount,” Jefferies (NYSE:JEF) analyst Atul Goyal wrote in a note, referring to its market capitalisation being lower than the value of its assets.
SoftBank embarked on a share-buyback plan in March after the discount yawned to record levels, spending 1 trillion yen ($9.4 billion) through August before pointing to a slowdown in the pace of purchases.
The tech stock sell-off risks the share price gains, with SoftBank’s trades striking some investors as going well beyond aims and methods of the public stock investment plan as previously outlined by Son.
SoftBank, which has a history of making opaque trades through derivatives, has not commented publicly on the matter.
The group’s purchase of call options in addition to share buying, which gives access to a much higher amount of shares on paper, is seen by analysts as having exacerbated the U.S. stock market’s run-up and subsequent tech sell-off.
“The idea that tech is in a bubble is gaining traction,” said analyst Kirk Boodry at Redex Research. Given the lack of clarity from the group, selling pressure is likely to continue while U.S. tech stocks are falling, Boodry said.
The change in strategy comes as SoftBank builds up ready cash by slashing exposure to stable assets such as Japanese wireless carrier SoftBank Corp (T:9434), which offers high dividends.
Son frequently emphasises in presentations the clear market value of his listed assets and how the group’s $100 billion Vision Fund offers exposure to a basket of high-growth, unlisted startups.
However the shifting risk profile has caused nervousness, making SoftBank “uninvestable for some investors,” Boodry said.
($1 = 105.9600 yen)