The much awaited blockbuster IPO from Japan’s Softbank has failed to create the impetus in the share market to the level that most had hoped for.
There was a sharp drop of 15 per cent in Tokyo in the shares in the Japanese company’s mobile telecommunications unit in the first day of trading after the IPO launch. .
SoftBank CEO Masa Son’s vast tech empire forms the foundation for the business which is one of the largest wireless carriers of Japan. About $23.5 billion was raised by SoftBank Group after it listed a big chunk of it.
This resulted in the biggest ever stock float in Japan ever and was the second largest in the world – behind $25 billion listing in 2014 in New York by Chinese online giant Alibaba.
SoftBank had increased the number of shares that was selling because of strong demand from investors to get hold of a piece of the mobile business. But the listing comes at a tough time for the share market because there has been a 7 per cent fall in Japan’s benchmark Nikkei index since the beginning of December and has dropped 14 per cent from its most recent high in early October.
There were also some issues this month for the mobile business of SoftBank which was valued at about $55 billion. On December 6, there was a nationwide outage of its services. Additionally, the company announced last week that it was considering replacement of equipment made by Chinese manufacturer Huawei from its existing network which could cost the company considerable time and money.
Poor market conditions was cited as the reason for the poor debut of the company at the Tokyo stock exchange by the CEO of SoftBank’s mobile division, Ken Miyauchi. The IPO launch had initially been planned for September or October by SoftBank which was later deferred to December, he said at a news conference after the market closed.
According to analysts, concerns over a damaging price war was the partial part reason that the Japanese mom-and-pop investors, who were the major clients buyers of the shares, decided to dump the shares on the first day of trading itself.
Following pressure from the Japanese government, a drop of as much as 40 per cent in prices of its cellphone plans next year has been announced by Japan’s biggest wireless carrier, NTT Docomo. Analysts expect that a similar step would be taken by Softbank as well.
The primary reason that foreign investors got interested in the shares of the company was because of the announcement of a 5 per cent dividend by the company which is more than the standard for Japanese companies, said Travis Lundy, an analyst at investment research platform Smartkarma. There can be threat to that announced dividend in the case of price war.
Son wants to reposition SoftBank as a global player in tech investment and the launch of the IPO is critical to that plan of the entrepreneur. This public floating essentially cut the company into two divisions as investors now have the choice of investing either in SoftBank’s mobile unit or its tech investment business.
(Adapted from CNN.com)