By Makiko Yamazaki and Tim Kelly
TOKYO (Reuters) - SoftBank Group Corp (T:9984) is buying back up to $4.8 billion of its shares after their recent slump, a move that partially met the demand of activist fund Elliott but failed to soothe investors panicking from the coronavirus pandemic.
The plan to buy back up to 7% of its shares for as much as 500 billion yen ($4.8 billion) announced by SoftBank on Friday comes as the Japanese investment group's shares have tumbled by about a quarter just in March.
It also comes after Elliott Management pressed SoftBank earlier this year for $20 billion in stock buybacks by selling down its stake in Chinese e-commerce giant Alibaba (N:BABA).
A SoftBank spokeswoman said the company had decided to conduct the buyback of its own accord after considering the risk that current stock market volatility could increase the deep discount that SoftBank's stock has relative to the value of its holdings.
No fresh financing is planned for the buyback, the spokeswoman said.
"With SoftBank shares trading more than 50% below fair value, buying back shares is a good idea. Not only is it a good price but previous buybacks have helped that holding company discount to meaningfully narrow,” said Kirk Boodry, an analyst at Redex Holdings, who publishes on the Smartkarma platform.
SoftBank shares fell as much 9.6% to a 14-month low on Friday amid a crash in global stock markets, but pared losses to close down 5%.
The buyback will begin on Monday and will take place over a year, the company said in a statement.
"The actual buybacks may occur soon while the price is low," SMBC Nikko Securities said in a note.
SoftBank said last month it plans to borrow up to 500 billion yen from 16 domestic and foreign financial institutions using part of its stake in telecommunications firm SoftBank Corp (T:9434) as collateral to boost its cash on hand.
The loan comes as its finances have been squeezed by losses at its $100 billion Vision Fund and as SoftBank injects its own cash into a successor fund due to lacklustre appetite from outside investors.
Elliott, one of the world's most powerful activist investors, has amassed a holding of almost $3 billion in SoftBank and has pressured the Japanese firm on a range of issues including buybacks and improving transparency.
SoftBank founder and CEO Masayoshi Son, who has repeatedly claimed that SoftBank shares are chronically undervalued, said last month that while open to potentially buying back shares he is no hurry to sell down the Alibaba stake.
The buyback plan unveiled on Friday follows a 600 billion yen share repurchase, its largest ever, announced a year ago. It funded that programme with proceeds from the bumper IPO of SoftBank Corp.