Debt and Coronavirus inspire fear in the giant company.
The pandemic didn’t leave marks on the conglomerate holding company, SoftBank. It is one of the fortunate companies that prospered during these difficult times, with stocks that doubled in price since the pandemic started.
Although it was unharmed by this, its financial situation is not too rosy, as the company must raise capital after a series of investment losses. What got the world's attention is the selling of its stake in T-Mobile, which could bring SoftBank $21 billion. The deal, alongside a plan of selling a 5% stake in one of its Japanese subsidiaries, is part of a $42 billion goal of SoftBank has to reach to finance stock buybacks and pay its debts.
The Japan-based company has its balance sheet devastated by write-downs of $18 billion caused last fiscal year by the Vision Fund. At that time, through share repurchases, a $4.7 billion buyback was completed in three months. Moreover, it is concerned about a second and even a third wave of COVID-19 infections, and it believes that it must increase its cash reserves.
The deal is to close on June 24, overseen by Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America, Citigroup, Barclays PLC, and Deutsche Bank. After the selling, SoftBank will remain with an approximately 9% stake in the US company. SoftBank will pay $300 million in fees to T-Mobile, which will cover all the expenses and charges associated with the deal.
According to experts, the Japanese giant will consider other assets to sell, including part of its stake in Alibaba.
T-Mobile stock gained 36% this year after the Monday trading session ended. In Tokyo, SoftBank stock price added 3%.
Sources: edition.cnn.com, reuters.com, finance.yahoo.com
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