Shares of Softbank fell sharply on Friday after it emerged that Masayoshi Son, chairman, had lent out up to one third of his holdings in the Japanese telecoms and internet conglomerate, partly as collateral against loans.
Details of the collateral arrangements emerged in regulatory filings as concerns swirl around Softbank, which this year paid Y1,800bn ($15.5bn) for UK mobile telecoms carrier Vodafone’s Japanese operations.
The shares, which fell 15 per cent in two days last month due to worries over accounting practices at Softbank, fell another 2.5 per cent to Y2,155 by late Friday morning.
In spite of being structured as loans, investors are concerned that if the Softbank share price falls too sharply Mr Son’s personal holdings – a bedrock of support for the notoriously volatile shares – could end up being whittled back. “That would cause a crisis of confidence,” said one investor.
Mr Son commands a big following among retail investors, who applaud his aggressive empire-building – Softbank comprises some 120 companies – and his visionary leadership.
The Vodafone acquisition, funded by a $16bn leveraged buy-out, further strained Softbank’s balance sheet, yet the assets were swiftly written down: in the months between leaving Vodafone’s books and appearing on those of Softbank, the fixed asset value was cut in half.
Analysts expect that news that Mr Son has lent out his personal holdings will weigh further on the stock, which has fallen 30 per cent since the Vodafone acquisition was agreed in March.
According to regulatory filings to the Tokyo Stock Exchange, 107m Softbank shares have been lent out to financial services companies – nearly all pledged by Mr Son, who holds some 330m shares, or roughly 30 per cent of the company.
Investors are worried some of these shares could end up being seized by the lenders.
For example, under the funding agreement relating to Nasdaq-listed Gravity, the lending agreement is automatically scrapped if Softbank’s share price falls below Y2,000. The shares closed at Y2,210, up on the beginning of the week but Y160 below the price before its sharp late-August drop.
Margin calls have further boosted the amount of collateral. In the Gravity case, Mr Son initially put up 18m shares but given the subsequent performance of Softbank shares, would have been obliged to raise that substantially. According to the TSE filing, Deutsche Securities – the lender on the Gravity transaction – now holds 54m Softbank shares. However, some of the bank’s holdings could be ordinary stock lending.
Softbank said: “These are Mr Son’s personal assets, and we are not in a position to know what he has done about his holdings.”