SoftBank, the telecommunications arm of billionaire Masayoshi Son’s conglomerate, has unveiled plans to issue a unique class of securities that blur the lines between traditional bonds and shares. SoftBank aims to secure ¥120 billion (approximately $808 million) in sales through this pioneering venture, which will see the issuance of so-called bond-type class shares listed on the Tokyo Stock Exchange. This development was disclosed in an official statement submitted to the financial regulatory authorities.
Under the terms outlined in the statement, SoftBank is offering an initial dividend rate ranging from 2.5% to 3% for the inaugural five-year period. Following this, the company retains the option to repurchase the securities at a value equivalent to the initial issue price, mirroring the characteristics of callable bonds. Notably, these securities do not confer voting privileges upon holders and cannot be converted into common stock.
Investors in Japan are displaying an increasing appetite for risk, driven by the disparity between domestic interest rates and the surge observed in global counterparts. Prospective tax exemptions via the Nippon Individual Savings Account program, combined with SoftBank’s robust brand recognition and comparatively higher yields, may prove enticing to yield-seeking investors.
The proceeds from this offering are earmarked for several strategic initiatives. These encompass the establishment of services leveraging generative artificial intelligence capable of producing diverse content forms such as text, images, and program code. Additionally, funds will be allocated towards the development of next-generation social infrastructure and the creation of innovative services. These strategic objectives were outlined in the official statement.
SoftBank intends to issue 30 million shares at ¥4,000 apiece, with final terms slated for determination on or before October 13. The primary focus of this offering will be directed towards individual investors, with select institutional investors also being targeted. SoftBank will conduct a book-building process, engaging both bond and equity investors, to ascertain the optimal terms for the offering.
Nomura Securities Co. has been appointed as the lead underwriter for this endeavor, with Mizuho Securities Co. and Daiwa Securities Co. also assuming roles in the sale process.
As confidence in the Japanese economy undergoes a steady simmer, SoftBank’s innovative offering serves as a potential harbinger of shifting investment trends. The introduction of bond-type class shares by SoftBank reflects a growing appetite for higher-risk, higher-reward investments, challenging the traditional norms of stock and bond markets. The response from potential investors remains uncertain, but it signals a broader trend of individuals seeking higher returns in a low-interest rate environment. Today’s currency in the investment landscape appears to be risk and reward, and SoftBank’s foray into high-yield equities may serve as a litmus test for this evolving dynamic.
Source: Bloomberg
