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SoftBank is determined to prioritize investments in artificial intelligence and has no immediate plans to buy back shares, despite a push for a $15 billion capital return program from activist investor Elliott.
In an interview with the Financial Times, SoftBank Chief Financial Officer Yoshimitsu Goto said the best use of the company’s strengthened balance sheet was in finding AI deals.
“We believe this is the time when new investment activities should take place that will underpin SoftBank Group’s future growth,” he said, declining to comment on any specific exchanges the company had with Elliott.
Elliott, which declined to comment, recently restructured a roughly $2 billion stake and is pushing SoftBank to announce a buyback once first-quarter results are released in August, according to people familiar with the matter.
But founder Masayoshi Son told SoftBank’s annual general meeting last month that the group’s past investments — which included some disastrously large bets by its Vision Funds on start-ups such as WeWork — were just a “warm-up” for its next phase. in AI and described share buybacks as “little things.”
Elliott argued that the buybacks would boost returns on equity and narrow the substantial discount between the value of SoftBank’s asset portfolio and its market capitalization, according to those familiar with its position. Elliott also believes the group has enough balance sheet to return capital to investors while making AI trades.
SoftBank’s current loan-to-value ratio, a measure of how much risk the group carries and is a key measure for Son, is close to 8.5 percent, a level Goto said was perhaps “too safe.”
Goto did not rule out buybacks in the medium term — as shareholder returns remain an important part of his considerations and markets may change in the coming months — but said the short-term direction of SoftBank’s capital spending was set.
“We don’t need to be so safe and we need to take on more challenges,” Goto said. “That’s why Masa says now is the time to invest.
Elliott’s buyback push mirrors his approach in early 2020, when he built a stake in SoftBank worth about $2.5 billion.
SoftBank eventually launched a buyback program the same year it went “defensive” and sold assets to appease shareholders in the face of the Covid-19 pandemic.
This time, SoftBank is going back on the offensive, looking for AI deals to support the company’s crown jewel, British chip designer Arma — a plan that Goto said many investors he spoke with have embraced.
The group’s share price has also risen more than 75 percent to record highs this year.
However, support for both Son and Goto declined at the recent general meeting.
Son, who owns 30 percent of SoftBank’s shares, won 79 percent of the vote, compared with 96 percent a year ago, after proxy adviser ISS recommended voting against the billionaire because of “unfavorable returns on equity.” Goto got 89 percent, down from 98 percent.
Son’s stake and its overreliance on a large number of retail bondholders also gave SoftBank protection from activist demands, Goto said.
“So while other companies may have a strong reaction to the word activist, we don’t have to be like them.”
Separately, Goto emphasized that SoftBank is ready to make “big deals” and suggested power generation and data centers as two areas ripe for investment. However, the CFO reiterated that it will protect its balance sheet through project financing or non-recourse loans.
“Since Masa is thinking about such big pictures and a big solution, his movement may be slower than before,” Goto warned.
The closing of deals is starting to take off. In May, SoftBank invested more than $1 billion in U.K. self-driving car startup Wayve, the biggest European AI deal to date. It’s also about buying British chipmaker Graphcore, according to people familiar with the matter.