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SoftBank Has Record IPO - And Then Loses $9 Billion
You win some, you lose some.
First, the win: SoftBank’s initial public offering on the Tokyo Stock Exchange of its Japanese mobile unit raised 2.65 trillion yen (roughly $23.5 billion), making it the largest ever IPO in Japan and placing it second only to Alibaba Group’s $25-billion IPO on the New York Stock Exchange in 2014. (As TechCrunch notes, SoftBank is one of Alibaba’s largest shareholders – so that was also a win for it.)
Now, the loss: SoftBank’s shares quickly plunged 15% after its debut, wiping out $9 billion in market value and falling below its IPO price.
The drop showed investors’ concerns over the mobile network’s recent service outage and its business relationship with China-based Huawei Technologies, which faces growing scrutiny from governments across the globe that worry about China’s allegedly expanding espionage operations. Huawei insists its technology isn’t being used by Beijing for spying efforts, sources tell Reuters that SoftBank plans to replace Huawei’s network equipment.
Although SoftBank faced some headwinds going into its IPO – it also carries debt that totals about 18 trillion yen ($160 billion) – the scope of its plunge on its debut was surprising, as Reuters notes.
“It was beyond our expectations that the shares would fall that much,” said a senior executive at one of SoftBank Corp’s domestic lead underwriters, declining to be named since he was not authorized to discuss the matter with the media.
Roughly 90 percent of the people who bought shares at offering price of 1,500 yen were individual retail investors, according to Bloomberg, with the other 10 percent being funds and money managers. SoftBank decided to forego an IPO price range and instead set an indicative share price of 1,500 yen.
SoftBank is offering up to about 37% of the mobile unit, known as SoftBank Corp., and is seeking to raise $23 billion. It will likely use some of the money to help pay down some of its swelling debt, but CEO Masayoshi Son will no doubt also want to funnel some money into the company’s $100-billion Vision Fund, which has made massive bets on the tech sector in recent years.
Photo: via Twitter