SoftBank Keeps Original Price Target for $23.5B IPO

Japan’s SoftBank Group Corp. kept the final price for the ¥2.65 trillion ($23.5 billion) initial public offering (IPO) of its domestic telecom business unchanged at ¥1,500 per share, reinforcing its confidence in gauging demand despite a network outage and global stocks turmoil last week.

In addition to the ¥1,500 a piece price for the IPO, SoftBank will also include an overallotment of 160 million shares to meet demand, bringing the total at approximately 1.76 billion shares. The overallotment will be exercised in full, according to a filing to the finance ministry showed on Monday.

The pricing sets the company’s market capitalization at ¥7.18 trillion ($62 billion), surpassing that of its bigger rival KDDI Corp. Of the shares being offered, 90 percent will be sold in Japan, with the majority going to retail investors.

Critics, however, have expressed concern over the price being too high given a slow growth in the Japanese telecoms market and expectations of renewed price competition in 2019.

SoftBank is widely seen to be a mature firm – and so is recognized to have relatively sluggish growth prospects – and the large number of shares being offered has become a cause for concern over oversupply.

Even so, brokerages said they would be able to draw enough investor attention with SoftBank’s dividend alone. Several people have shown interest due to the dividend payout ratio target of 85 percent that SoftBank has determined.

The share sale is a vital step for SoftBank Chairman and Chief Executive Masayoshi Son in his efforts to lessen debt while continuing to invest in next-generation tech firms.

Shares of the new entity, SoftBank Corp., will start trading on the Tokyo Stock Exchange on December 19 under the ticker 9434.

Looming Concerns

The announcement came just days after an unexpected nationwide network outage which left 34 million mobile subscribers in the country without services for several hours.

SoftBank, Japan’s third largest mobile phone network provider, stated that the incident would not affect its profits and dividend forecast set on November 12.

The outage may have led some retail investors to change their mind, but not enough to affect the price, said analyst Kyohei Jingu prior to the announcement.

At the same time, a worldwide stock sell-off has pulled the Nikkei 225 down by more than 5 percent this month, although Jingu stated that it is not likely to cause a major disruption for the offering.

Still, other reasons for concern looms, including the arrest of Meng Wanzhou, chief financial officer of China’s Huawei Technologies Co. Ltd. The Japanese conglomerate uses Huawei base stations, even though the outage on December 6 was due to faulty software supplied by Ericsson.

Sources said last week that Tokyo intends to prohibit government purchases of equipment from Huawei and Shenzhen-based ZTE Corp. to protect Japan from possible intelligence leaks and cyber attacks.

SoftBank’s planned listing also comes at a time when the country’s wireless sector has come under pressure from the government.

The Japanese government wants to see lower mobile phone charges as competition is expected to intensify with the entrance of e-commerce group Rakuten Inc. into the market next year.

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