What's going on?
Japanese tech giant SoftBank defied convention on Friday, setting a firm $21 billion target for the forthcoming initial public offering (IPO) of its core mobile phone business.
What does this mean?
Companies normally suggest a price range for investors to buy shares in a newly listed company – and SoftBank’s IPO will be the first to debut on the Tokyo Stock Exchange without one. At a fixed $13 per share, SoftBank and its advisors are seem confident demand is high enough to do away with the safety net of a flexible price. But they’re taking no chances: in another first for Japan, TV ads have been broadcast (SoftBank loves a good ad) to attract the individual investors for whom 87% of the new shares are reserved.
Why should I care?
For markets: Substance over style.
The non-Japanese typically know SoftBank for its $100 billion Vision Fund’s big bets on big names like WeWork and Uber. But SoftBank itself is actually no sexier than Vodafone or T-Mobile. It’s primarily a telecommunications firm – and a potentially attractive investment when markets are as uncertain as they are at the moment. A company with stable cash flows, regular dividends, and consumers locked in to long-term mobile phone contracts is a relatively safe bet. The IPO offers investors a chance to buy a third of SoftBank’s mobile business – and the regular dividend payment it generates – without also buying the uncertainties of a giant tech investment fund.
The bigger picture: Paying down the (phone) credit card.
We all have bills to pay – and Softbank is no different. The proceeds of the IPO, which may be the second-biggest ever, will help SoftBank pay down its debts. The telecoms sector navigated years of disruption by diversifying into new business lines – and racking up mountains of debt. Companies have also spent big on upgrading their networks to cope with the explosion of smart devices and to prepare for 5G connectivity.