SoftBank confident for $21b IPO

Including an option to sell more shares, offering may climb to 2.65 trillion yen

SoftBank Group Corp dispensed with a price range and chose to set a single preliminary figure for the $21 billion (Dh77 billion) initial public offering (IPO) of its Japanese telecom business, showing that the company and its bankers are confident of their ability to gauge demand.

It’s the first time that a stock will debut on the Tokyo Stock Exchange without a range, one of the lead underwriters said. The Japanese technology giant plans to sell shares for 1,500 yen apiece, it said in a filing yesterday, the same price that it indicated when announcing the IPO last month.

At that figure, the IPO would raise at least 2.41 trillion yen ($21 billion). Founder Masayoshi Son and his bankers are betting that they will be able to sell all of the shares in the cashgenerating business, which spans wireless, broadband and Japanese billionaire Masayoshi Son is transforming his Tokyo-based company from a telecom operator into a global tech investor, with stakes in Uber Technologies Inc and ARM Holdings. But the listing comes at a time when Japan’s wireless industry has come under pressure from the government to reduce phone bills and the entry of e-commerce giant Rakuten Inc. raises prospects of a price war.

SoftBank is selling about 1.6 billion shares in the new entity, which will be called SoftBank Corp., and plans to set the final price on December 10. fixed-line services and has 34 million mobile subscribers. Usually, potential investors are given a range, so that the final price can be adjusted for fluctuations in demand.

“They must have a high degree of confidence,” said Chris Lane, an analyst at Sanford C. Bernstein & Co.

An underpriced IPO would raise less cash for the company, and could see the shares jump when trading starts on December 19. On the other hand, an overpriced IPO carries the risk of leaving unsold shares on the table. The final price may still be adjusted, SoftBank said.

Including an option to sell more shares, the offering could climb to as much as 2.65 trillion yen. SoftBank is looking to tempt investors with a dividend payout ratio of about 85 per cent of net income, working out to a yield of almost 5 per cent.

“There seems to be strength with domestic retail investors and the reason for that is the yield,” Lane said. “There isn’t strong support from the institutional investors that I speak to, but there will be institutional buying because some fund managers will want to mimic the allocation to the index.”

After the public listing, SoftBank Group will hold about 63 per cent of the Japan wireless business, which would debut at a valuation of about 7.2 trillion yen at the preliminary price.