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SoftBank Plays Hardball

Softbank announces IPO details

Image source: Ned Snowman - Shutterstock

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.

Originally posted as part of the Finimize daily email.

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