SoftBank unit’s debut one of Japan’s worst, after $24B IPO
Shares of Japanese mobile-phone unit close nearly 15% below the initial offering price
TOKYO— SoftBank Group Corp.’s Japanese mobile-phone unit made one of the country’s worst debuts after its nearly $24 billion (U.S.) initial public offering as investors worried about a price war and the company’s reliance on Chinese supplier Huawei Technologies Co.
Shares closed nearly 15% below the ¥1,500 initial offering price, finishing their first day of Tokyo Stock Exchange trading at ¥1,282 ($11.40)
The IPO raised ¥2.65 trillion ($23.6 billion), second only to the 2014 listing of China’s Alibaba Group Holding Ltd., in which SoftBank Group also owns a lead stake.
Floating a little more than a third of the mobile unit—mainly to Japanese investors—is part of SoftBank Group’s strategy to cash out of slower growing assets to pay for high-risk, highreturn stakes in the world’s biggest technology startups through the nearly $100 billion Saudi-backed Vision Fund.
Fumiaki Ito, a 74-year-old retiree, said his broker encouraged him to enter a lottery for shares in the mobile unit, called SoftBank Corp., saying there was high demand. Mr. Ito won the right to buy 300 shares and decided to do so, leaving him with a paper loss of nearly $600.
“I was sure it was going to rise,” Mr. Ito said. “I never thought it would go down 10% on the first day.”
The SoftBank stock’s first-day performance was the secondworst of IPOs in Japan in the past decade that raised at least $125 million, according to Dealogic, barely beating out Japan Display Inc.’s 15% fall in its March 2014 debut. Japan Display kept falling after that and is down 91% from its offering price.
“We have just started. We want to prove ourselves,” SoftBank Corp. Chief Executive Ken Miyauchi said at a news conference after the market closed. He said SoftBank would improve its network and pursue new revenue through partnerships with companies in which parent SoftBank Group has invested such as Chinese ride-hailing firm Didi Chuxing Technology Co.
Japan’s investors and banks have long helped bankroll SoftBank founder and chief executive Masayoshi Son’s ambitions, with investors snatching up its bonds and banks vying to provide it loans in an environment of weak borrower demand.
At the offering price, the mobile-phone unit offered a dividend yield of about 5%. But a global slump in technology stocks took a toll on investor appetite. In addition, the unit faces government pressure to slash prices and distance itself from Huawei, a low-cost pro- vider of telecommunications gear.
Japan’s government has decided to exclude Huawei from its own purchases as it tightens security measures, a top official said this week. SoftBank Corp. executives said they would comply with government guidelines and replace Chinese equipment in existing and future networks as necessary.
“Institutional investors stayed away because they thought it was too pricey,” said Chris Lane, senior analyst of Asia-Pacific telecommunications for Sanford C. Bernstein. “Leaving out institutional investors makes for these movements.”
SoftBank relies more on Huawei than its two bigger rivals, NTT Docomo Inc. and KDDI Corp., which together control three-quarters of the market. The two have said they plan to cut prices by as much as 40% next year, while SoftBank further faces pressure from Japanese e-commerce company Rakuten Inc.’s planned entrance as a low-cost service provider.
A network blackout earlier this month that affected more than 30 million SoftBank customers nationwide for more than four hours further eroded enthusiasm for the IPO, said Hiroki Shimazu, chief strategist at MCP Asset Management in Tokyo.
Mr. Son has said SoftBank Group hopes to use the proceeds of the IPO to chase new investments and to pay down debt. The group’s total interestaccruing debt was just shy of ¥18 trillion ($160 billion) at the end of September.
In addition to the Japan IPO, SoftBank Group’s plans to sell control of Sprint Corp. in the U.S. to T-Mobile US Inc. would help lower that debt, freeing money up for investment. The Sprint deal moved a step forward Monday, winning approval from U.S. national-security officials.
SoftBank Group is also dealing with the fallout from its ties to Saudi Arabia, which committed $45 billion to the Vision Fund. The murder of Saudi journalist Jamal Khashoggi and the Saudi role in the war in Yemen have caused a few venture capitalists to call on companies to reject Vision Fund money.