SoftBank’s Buybacks Paused in August. So Did Its Stock Rally

(Bloomberg) -- SoftBank Group Corp. suspended its multi-billion dollar buyback program in August, bringing to a halt the significant share price gains that Masayoshi Son’s conglomerate has largely enjoyed since the plan and asset sales were announced earlier this year.

In a filing to the stock exchange Tuesday, SoftBank said it hadn’t bought back stock between Aug. 4 and the end of that month, after previously announcing it had acquired shares on Aug. 3. It blamed “nonpublic facts” around insider trading for the inaction, a likely allusion to its mega-deal to sell its Arm Ltd. chip division for $40 billion to Nvidia Corp., announced Monday.

Without the support of the buyback, shares were basically flat in August, rising just 0.05%. SoftBank shares have gained every month this year since the coronavirus pandemic-fueled a market collapse in March. That month, it announced plans to launch asset sales and also scoop up stock worth as much as $23.6 billion during the fiscal year. SoftBank shares surged by more than 20% in July.

The stock hit its 2020 high of 6,932 yen on Aug. 3 -- the last day the company purchased shares, according a statement to the Tokyo Stock Exchange on Tuesday. September’s data are not yet available.

With the proposed deal with Nvidia now announced, SoftBank may be able to restart its buyback program. Shares have risen every day this week, adding as much as 3.1% on Wednesday.

Softbank has promised to spend as much as 2.5 trillion yen ($23.6 billion) to buy back stock since the start of this year, but has so far only spent 1 trillion yen of that amount. As of the end of August, it had yet to use any of the 500 billion yen it pledged in a program decided on June 25. It also hasn’t launched the 1 trillion yen buyback plan the board agreed on July 30. SoftBank acknowledged in July that it might not complete the buybacks by its originally scheduled target of March 31, the end of its fiscal year.

SoftBank has bought an average of about 16 billion yen of shares every day in which it has been in the market this year, and as much as double that on some days. Despite a wobble last week, SoftBank shares are worth more than twice what they were before the conglomerate announced its buyback plan and 4.5 trillion yen asset selldown in March.

The scale of SoftBank’s buyback program has piqued renewed interest among market participants in recent weeks, following reports that senior executives may be preparing for a management buyout.

SMBC Nikko Securities Inc. analyst Satoru Kikuchi first mentioned the renewed buyout talks on Sept. 9, pointing to the sale of Arm, which had then yet to be announced, and the mammoth buybacks as signs that Son could be thinking of taking the firm private.

Going private is now likely a more alluring prospect for SoftBank after it faced investor flak on news that it had been using derivatives to buy into technology companies.

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