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Another Activist Buys Into SoftBank, This Time as a Value Play

Takako Taniguchi and Min Jeong Lee
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Another Activist Buys Into SoftBank, This Time as a Value Play

(Bloomberg) --

Another activist investor has bought a stake in SoftBank Group Corp., betting the recent stock plunge makes it a bargain that’s too good to ignore.

Asset Value Investors Ltd., a U.K. money manager known for its activist campaigns at smaller Japanese firms, has invested about 5 billion yen ($46.6 million) in Masayoshi Son’s company, Chief Executive Officer Joe Bauernfreund said. That comes after Elliott Management Corp. took a large position and called on SoftBank to buy back shares.

SoftBank was sucked into the coronavirus sell-off, losing more than half its value from a high in mid-February before paring some of the decline. The reversal came as founder Son decided to do what investors had been urging for years -- sell holdings to fund shareholder returns and pay down debt.

“It’s very, very cheap,” Bauernfreund said in an interview. “It trades at a massive discount to the value of its assets. And on top of that, the planned asset disposal and buyback will be massively accretive to the net asset value.”

AVI has become known in the Japanese investment community for its activist campaigns at companies including Tokyo Broadcasting System Holdings Inc. and Teikoku Sen-I Co., both of which it has urged to increase shareholder returns.

SoftBank is too big for AVI to make shareholder proposals at annual general meetings, Bauernfreund said. AVI started buying SoftBank shares in February and continued to build its position throughout March, he said.

Still, AVI has prescriptions for SoftBank, and they sound very similar to Elliott’s suggestions. It has written to SoftBank directors to express its views, Bauernfreund said.

Buybacks, Governance

“They should be selling down some of their investment portfolio, using the money to buy back shares,” he said. “They should be improving their corporate governance by improving the board structure, and by having more transparency in their investment portfolio, in particular in the Vision Fund.”

SoftBank declined to comment.

SoftBank currently trades at about a 70% discount to its net asset value, Bauernfreund said. The company has a market value of about $73 billion, even though it has equity holdings worth more than $208 billion, including a huge stake in Alibaba Group Holding Ltd., according to data compiled by Bloomberg.

“The discount won’t stay at the current level,” Bauernfreund said. “It’s mathematically impossible, really, for the discount to stay at these wide levels.”

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