What’s going on here?
Activist
hedge
fund Elliott Investment Management snapped up shares in SoftBank, eager to whip the Japanese tech giant into shape.
What does this mean?
Activist investors buy major stakes in companies so they can impact key decisions, with an aim to make a
profit
or create more value for shareholders. In this case, Elliott wants to use its stake in SoftBank to force the company to buy back $15 billion of shares, which should reduce their supply and – all else equal – increase their price. Elliott has a track record to back the plan up, too: the hedge fund has previously taken hefty stakes in Japanese real estate firm Mitsui Fudosan and printing company Dainippon Print, before leading them both to significant buybacks. No wonder, then, that SoftBank’s share price jumped 5% after news broke of Elliott’s fresh stake.
Why should I care?
Zooming in: Take two will take two.
Elliott pulled off this exact play a few years ago. The firm bought SoftBank shares, pushed the company toward a buyback, and then sold the stock for a profit when the shares increased in value. And SoftBank can afford another round: it’s saved up cash by being careful in the last few years, burned by disastrous investments like its WeWork punt. It’s been making money elsewhere, too: SoftBank’s stake in its famed Vision Funds is valued at around $51 billion, and the company owns a 90% stake in UK chip designer Arm, which is now worth $86 billion.
The bigger picture: Japan’s lovely this time of year.
Activist investors are being drawn to Japanese companies, partly due to government reforms that aim to make the country’s businesses more profitable for shareholders. Private equity firms are also flocking to the Land of the Rising Sun to do what they do best: take companies private. After all, there are loads of firms that want to keep all the takings for themselves.
