Telecom & Wireless

SoftBank Puts $21 Billion Bandage on Bleeding Vision Fund Wound

The past year has not been kind to Softbank Group’s $100 billion Vision Fund. Late last month, the Tokyo-based company said it would take a write-down of around $5.6 billion on the fund’s investment in Uber Technologies Inc. (NYSE: UBER) and $7.6 billion on an investment in startup office-sharing rental firm WeWork.

Those were the two largest write-downs in a total $17.7 billion loss for the fund in the fiscal year ended in March.

SoftBank announced Monday that it plans to divest more than $21 billion of its stake in T-Mobile US Inc. (NASDAQ: TMUS) now that the merger with Sprint is completed. SoftBank was the majority owner of Sprint, and the sale of about 65% of its 24.6% stake in T-Mobile stock is expected to be used to repurchase stock and reduce debt.

The transaction includes an offering of 133.55 million shares of T-Mobile common stock, the proceeds of which will be used to acquire an equal number of issued and outstanding shares of T-Mobile stock from SoftBank. The Japanese firm will pay T-Mobile a fee of $300 million for facilitating the transactions.

Once the transaction is completed, SoftBank will own 8.6% of T-Mobile’s outstanding shares and Deutsche Telekom will hold 43.5%. SoftBank also has granted Deutsche Telekom call options expiring in 2024 on SoftBank’s remaining stake in T-Mobile.

The underwriters of T-Mobile’s stock offering have reserved 5 million shares for sale to certain officers of SoftBank, and Marcel Claure, former CEO of Sprint and Softbank’s chief operating officer and a director of T-Mobile, will purchase stock valued at $500 million. The underwriters also have an overallotment option on approximately 10 million shares.

Current T-Mobile investors are being awarded the right to purchase 0.05 of a share at the same price as the new offering for each share they own as of June 25. T-Mobile is reserving 19.75 million repurchased shares for this purpose, clearly an effort to sidestep a sudden drop in the share price due to sales by disgruntled stockholders.

Last year’s loss in SoftBank’s Vision Fund has hobbled efforts to raise capital for Vision Fund 2, which was expected to raise $108 billion. That has not stopped SoftBank from using $38 billion of its own money to prime the second fund by leading a $500 million funding round for China’s leading ride-hailing service, Didi Chuxing, and investing $250 million in U.S. pharmacy startup Alto.

T-Mobile stock traded down about 1.1% in the late morning Tuesday, at $105.43 in a 52-week range of $63.50 to $109.00. The consensus 12-month price target on the stock is $114.20.