SoftBank Group Corp., a renowned multinational Japanese conglomerate holding firm, has reportedly announced a $41 billion asset sale plan to consolidate the group’s dwindling market value brought on by the global coronavirus pandemic.
With the asset sale, the company plans to further expand buyback and cut its debt, an amount that is almost equivalent to the company’s market value a week ago. The overall scale of the endeavor, sanctioned by Masayoshi Son, has surprised many company investors, which subsequently sent the company’s stock up over 19%.
However, that is still a small fraction of capitalization lost by the investment company since its peak in 2020. This is further highlighting concerns that the falling technology sector valuations would negatively impact Son’s debt-ridden company.
The conglomerate, which is also responsible for operating the 100-billion-dollar Vision Fund, is especially considered to be susceptible to economic shocks owing to its substantial debt load and its association to unprofitable startups throughout the world.
Following the rally on Monday, the company stocks are still down more than 40% from its 2020 peak, which it recorded in February.
The rout triggered by the COVID-19 pandemic has also began affecting credit markets and triggered a surge in the overall cost of insuring any debt against default, even including that of the Japanese conglomerate, who saw its credit-default swaps hitting their highest levels yet in over a decade.
While the company has not specified which assets it plans to sell, its stake in Alibaba is worth over $120 billion and represents the biggest chunk of value that is yet unrealized. It is also unclear what the company’s timeframe is, its stakes in Sprint as well as Hong Kong Alibaba shares might be subject to their own lockup periods.
One year in Alibaba’s case and several years in case of Sprint. However, certain conditions might allow for earlier transfers and the firm could likely use special vehicles to complete the deal.