NEW: Things Get Real For Softbank As They "Buy Their Own Dip" With $3.5bn Share Buybacks...

Well folk, it’s one thing to buy someone else's dip, but it’s a whole ‘nother meaning when you buy your own dip. For some reason, that sounds wrong as I type that, so I’ll put it plainly: Just two days after suffering it’s single worst day in recorded history (plunging -18%), Softbank, the Tokyo tech conglomerate, has just initiated a massive $3.5 billion buyback on its own shares. 

(Source: Wall Street Journal) 

For those of you not keeping tabs on this, because you know, it’s not a US stock, this story is definitely noteworthy considering the Nikkei played a major part in wreaking havoc on global markets this week. 

However, even though this follows a seismic $2 billion investment from Elliott Management as they urged Softbank to issue a buyback earlier this year - it seems that Softbank has timed it’s own demise dang near perfectly as it’s now buying it’s stock at a screaming discount. 

(Source: Giphy) 

So what gives here? 

Well after a whopping -12% Nikkei fallout, SoftBank has decided to “go big or go home” despite their recorded net loss of JPY 174.3 billion ($1.2 billion) for the quarter. However, even with the disappointing showing in their financials, Softbanks' -26.19% plunge this month has basically put shares on the clearance rack. 

(Source: Yahoo Finance) 

Again, this decision comes amidst global market chaos, where yen carry trades unwound faster than a cheap sweater as Softbank’s market cap is now trading at a 60% discount to its asset value. But given Softbank’s 90% stake in British chip designer Arm Holdings (who just outperformed analyst estimates on EPS by a solid 19%), and CEO Masayoshi Son’s optimistic hopes about AI’s potential - this, along with the buyback could provide some stability and future confidence for investors regarding the stock. 

(Source: Yahoo Finance)

Now of course while the market sentiment around AI is becoming worrisome in a sense that company financials aren’t matching up to the hype, Softbank’s big bet on Arm could be its most lucrative.

For instance, with Arm’s revenues continuing to beat estimates with $939m from their most recent quarter results, 31 different analysts are now predicting revenues of $3.98 billion in 2025. Meaning if met this would seal a nice 14% in growth compared to the last 12 months.

(Source: Yahoo Finance) 

And with the Arm’s chip designs giving Taiwan Semiconductors and Nvidia a run for their money with the versatility and efficiency within their chips, Softbank seems to have a dark horse in it’s shed that could hand out a nice ROI in the future. Especially as chip demand continues to skyrocket amidst a concerning AI environment.

(Source: Giphy)

So with all of that said, Softbank is clearly bullish on its future as it’s officially putting some good use to the $31 billion in cash reserves it has held up under its mattress. Plus, when it comes to investors, this definitely adds an extra jolt of confidence when a company puts its own money on the line.

Now only time will tell if this buyback will be a genius move or a running joke in the future, but with its main influence on the global exchanges, this is definitely something to take note of and keep an eye on as we continue on throughout the trading week. 

At the time of this writing, Softbank is up +6.21% on the day (and up +21.45% YTD).

(Source: Google Finance) 

Stocks.News does not hold any positions in companies mentioned in the article.