What's going on?
Japanese conglomerate SoftBank announced plans on Monday to sell $41 billion worth of assets and return some of the cash to its shareholders – proving investors might still have something to look forward to.
What does this mean?
While SoftBank hasn’t confirmed exactly which assets it’ll sell, it has lots to choose from. But if it’s looking to earn big, it might consider Arm – the British smartphone microchip designer it bought for $32 billion in 2016 – or the more than $120 billion stake it owns in Chinese ecommerce giant Alibaba.
SoftBank has promised to spend $18 billion of its windfall on share buybacks, on top of the $5 billion it’d previously announced. The company might be hoping to show investors – and one activist investor in particular – that it has more than enough cash to outlast the current health and financial crises. And given some of SoftBank’s high-stakes investments famously failed to pan out as hoped – sorry to keep bringing it up, WeWork – investors might be relieved to hear it.
Why should I care?
For markets: The art of self-defense.
SoftBank’s share price has fallen more than 40% this year, but it bounced back by 19% on Monday. That might be down to the resilience of SoftBank’s large telecoms business, as well as its predictability in a downturn thanks to its long contracts. And since the conglomerate is also promising to use some of its future cash influx to buy back and cancel some of its debt, it’ll hopefully become an overall less risky – and potentially more lucrative – investment proposition.
Zooming out: Rage against the machine.
SoftBank isn’t the only company trying to wriggle out of trouble: beleaguered aircraft manufacturer Airbus announced steps on Monday to build a $32 billion cash reserve, in part by borrowing $16 billion and cutting its dividend. If only its customers – airlines – were so lucky: they’re still calling for government support.