SoftBank Contemplates Going Private Using 'Slow-Burn' Buyout: Bloomberg

Japan's SoftBank Group Corp. (OTC: SFTBY) is considering going private by gradually buying back stock until founder Masayoshi Son has a significant enough stake to squeeze out the remaining investors, Bloomberg reports.

What Happened: SoftBank's stock in Japan surged 5.6%, to hit a 20-year high at ¥7,489, after the Bloomberg report.

Founder Masayoshi Son has a 27% stake in the company. Under Japanese regulations, Son could compel other shareholders to sell when he gets to 66% stake, without paying a premium.

'Slow-burn' is a strategy where a company buys back stock gradually. In case of a formal buyout, the company would have to pay a premium of around 25%.

Why It Matters: SoftBank has an advantage as its stock is trading at a discount to the value of the assets it holds, such as Alibaba Group Holding Ltd (NYSE: BABA), Uber Technologies Inc (NYSE: UBER), and DoorDash Inc. In such a scenario, shareholders are likely to support a buyback.

Billionaire Masayoshi Son had said in February that SoftBank is better off as a public company but has declined to comment on the going-private reports.

According to Bloomberg, Son said at a conference in November, "If our shares drop down, I will buy back more shares more aggressively."

SoftBank has sold assets and used the proceeds to buy back stock. The value of stock outside Son's control is about $87 billion, and SoftBank is stilling on $80 billion in cash.

Price Action: SFTBY shares closed 0.26% higher to close at $34.08 on Tuesday.

Image Courtesy: Wikimedia