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Hi - I am Sergey Dluzhevskiy, a portfolio manager with Gabelli Funds. Today, I will highlight SoftBank Group, an investment holding company that is a top 10 holding of The Gabelli Global Content & Connectivity Fund. SoftBank, led by its founder Masayoshi Son, manages a portfolio of listed holdings, primarily in the online services and communications sectors, including stakes in Alibaba Group, SoftBank Telecom, and T-Mobile US. It also owns Arm Holdings, the world’s leading semiconductor IP company, and manages a portfolio of unlisted holdings, both directly and through SoftBank Vision Fund, with particular focus on Artificial Intelligence, robotics, and ride sharing. SoftBank has nearly 2.1 billion shares outstanding, closed around 4,100 yen, for equity market cap of 8.6 trillion yen, or $79 billion dollars. Net debt at the holding company is 6 trillion yen or $56 billion dollars.

On March 23rd, SoftBank announced that its Board has approved sale or monetization of up to 4.5 trillion-yen worth of assets and authorized a repurchase of up to 2 trillion yen of common stock, with the balance to be used for debt reduction and increased cash reserves. The transactions will be executed over the next 4 quarters. The new buyback is in addition to half-a-trillion-yen share repurchase program announced earlier in March.
These plans for asset monetization and significant share repurchases were unveiled as SoftBank stock was trading at record discount levels to its Net Asset Value, as concerns over the firm’s investment missteps related to WeWork and high absolute level of net debt were exacerbated by broad market sell-off related to Coronavirus global pandemic. While the stock has recovered somewhat since the announcement, the discount to NAV remains wide. At current prices, the buyback could translate into 29 percent of shares outstanding. SoftBank could look to monetize portions of its Alibaba and SoftBank Telecom stakes. In addition, while it is under a 4-year lockup in relation to New T-Mobile, it could request a permission from Deutsche Telekom to monetize a portion of its stake.

Again, the stock continues to trade at a wide discount to NAV. With listed securities marked to market, if we assume that SoftBank could dispose of its assets in a tax-free manner, while private holdings are valued at December 2019 model valuations provided by the company, the stock is trading at a 62% discount to NAV of nearly 10,850 yen. In a more conservative scenario, if we assume full 30 percent tax on gains related to major listed holdings and discount private assets 20 to 25 percent from December model valuations, the stock still trades at a 46% discount to NAV of about 7,650 yen.