|Bid||0.00 x 1100|
|Ask||0.00 x 1200|
|Day's Range||8.34 - 8.66|
|52 Week Range||4.26 - 10.16|
|Beta (5Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Earnings Date||Jul. 31, 2020 - Aug. 04, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||7.45|
(Bloomberg Opinion) -- If exchange-traded funds are the fast food of investing, then private equity is the private kitchen. As the world spirals into a recession and the coronavirus pandemic batters your retirement accounts, wealthy investors who bought into assets from unicorns to paintings can hide in an elite bubble that isn’t subject to brutal mark-to-market fair value writedowns.But once in a while, a high-profile unicorn hunter can blow the lid off that opaque world, giving us a glimpse of just how much pain private equity is in. Sometimes, private kitchens churn out terrible dishes, too.Investors are fleeing as SoftBank Group Corp., which runs the $100 billion Vision Fund, scrambles to shore up its balance sheet, as well as those of its portfolio companies. SoftBank gives a good feel for the landscape, because it behaves more like a private equity firm than an angel investor: Its capital is really debt, and it likes to invest in rivals and force them to merge. SoftBank is seeking to raise billions to support its unicorns battered by the coronavirus outbreak, saving those that still show potential and cutting loose the ones that bleed too much cash. On the one hand, it’s in talks to lead a fresh $100 million funding round for Plenty Inc., perhaps because the indoor farming startup can benefit from panic buying of fresh produce. On the other, OneWeb, a satellite operator, has filed for bankruptcy.SoftBank’s desperate scramble must resonate with many private equity firms out there, whose portfolio companies will inevitably need their patrons’ help. By early March, industry titans Blackstone Group Inc. and Carlyle Group Inc. already urged businesses they’ve invested in to do whatever it takes to stave off a credit crunch. But with blue chips drawing at least $124 billion from their credit lines in the first three weeks of March, and dollar funding this tight, will lenders have the bandwidth to aid smaller companies? Banks certainly have much bigger deals to digest: They’ll need to come up with $23 billion of loans soon for T-Mobile USA Inc. to close its merger with Sprint Corp.Granted, for private equity firms, cash levels are at a record high. Last year, capital committed to this sector grew 20% to $1.3 trillion, estimates Pitchbook, a Morningstar company. But instead of buying new assets, firms may have to earmark a good chunk of that money for existing investments, either recapitalizing — like what Softbank has done for basket case WeWork — or leading unplanned funding rounds.Meanwhile, making capital calls to investors can’t be much fun right now. Even the best of them — pension funds and sovereign wealth funds — are dealing with their own crises and may not want to pick up your calls right away, especially if it means selling other assets at deep discounts just to come up with your money. Plus, we now all have the convenient excuse of working from home: Some of us are hiding in the woods (or the Hamptons), away from the raging virus, and may not have good cellphone reception.Just look at SoftBank. As of December, only about 75% of the Vision Fund’s committed capital is with the fund, and the company still needs to call $17.5 billion from third-party investors, its latest filing shows. Since then, Saudi Arabia, a major investor, has started an oil price war, further diminishing its fiscal power. So forget about Vision Fund 2; founder Masayoshi Son needs to fill up 1.0 first. In the last decade, private equity firms piled vast amount of debt onto their portfolio companies to boost returns. More than 75% of deals in the sector included debt multiples greater than six times Ebitda in 2019, compared with 25% after the collapse of Lehman Brothers Holdings Inc., according to Pitchbook. When liquidity recedes, these investments are in trouble.To make matters worse, portfolio companies’ ability to service debt is even worse than it looks on paper, because Wall Street lawyers and bankers often juice earnings to make purchase prices look more reasonable, and so underwriters can originate more loans and earn more fees. In 2016, businesses involved in a merger or leveraged buyout missed their own earnings projections by an average of 35% in the first year after the deal, Bloomberg Businessweek reported in December.So imagine the coronavirus world, where any prior earnings projections feel as outdated as “Sex and the City” stars prancing around Central Park in Manolo Blahniks. Just as social distancing is becoming the norm, so too will corporate defaults. The global rate could climb to 16.1% if the pandemic brings economic conditions that mirror the Great Recession, Moody’s Investors Services warned last week.In private equity, fancy terms like total addressable market or adjusted Ebitda are often used to make a company look more profitable than it is. But the coronavirus is unraveling all that. Just like the rest of world, private markets are also suffering. Ray Dalio’s “cash is trash” motto is so yesterday. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
HP CEO Enrique Lores joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss how HP is faring amid the coronavirus outbreak and what it is doing to support the U.S. front liners.
(Bloomberg) -- SoftBank Group Corp. lashed out at Moody’s Corp. after its debt was downgraded by two notches, accusing the ratings company of “bias” and “creating substantial misunderstanding” days after the investment group announced a $41 billion asset sale program intended to shore up confidence.SoftBank’s shares slid as much as 8.4% early in Tokyo trade. The Moody’s downgrade -- lowering SoftBank’s corporate family rating and senior unsecured rating to Ba3 from Ba1 -- pushed the company deeper into junk territory. It comes at a critical time for founder Masayoshi Son, who this week set in motion his biggest play yet to silence critics and shore up his company’s crumbling shares and bonds.“Such a downgrade, which deviates substantially from Moody’s stated rating criteria, will cause substantial misunderstanding among investors who rely on ratings in making investment decisions,” SoftBank said in a statement, which also asked Moody’s to withdraw the rating.While SoftBank had 1.7 trillion yen ($15 billion) of cash and equivalents on hand at the end of December, it also has a huge debt load: The firm faces 1.68 trillion yen of bonds and loans coming due over the next two fiscal years and a total of about 3.6 trillion over the following four-year period.Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsThe company, which also operates the $100 billion Vision Fund, is vulnerable to economic shocks given that debt, and its ties to unprofitable startups from WeWork to Oyo Hotels. Many of the Vision Fund’s biggest bets lie in what’s known as the sharing economy, which has been particularly hard-hit by the pandemic that’s causing millions of people to stay indoors. Travel spending has slumped as a result.SoftBank is said to be targeting the sale of $14 billion of stock in the Chinese e-commerce leader Alibaba Group Holding Ltd., as well as slices of its domestic telecom arm and Sprint Corp., which is merging with T-Mobile US Inc. But SoftBank risked unloading some of its most prized assets at a discount given the downturn, Moody’s said in its statement.“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” said Motoki Yanase, a Moody’s senior credit officer in Tokyo.Read more: SoftBank Is Said to Plan $14 Billion Sale of Alibaba Shares“SoftBank’s decision to withdraw its corporate and foreign currency bond ratings by Moody’s probably wouldn’t save the company from higher new borrowing and refinancing costs.”Anthea Lai, analyst, Bloomberg IntelligenceThe scale of the endeavor unveiled by SoftBank on Monday surprised investors. Despite several days of gains, however, the stock remains down about 30% from its 2020 peak, underscoring persistent concerns that tumbling technology valuations will damage Son’s company. S&P Global Ratings said this week the asset sales could ease downward pressure on SoftBank’s credit quality.The rout triggered by the coronavirus has spread to credit markets and sparked a surge in the cost of insuring debt against default -- including that of SoftBank, whose credit-default swaps are near their highest level in about a decade. Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.(Updates with share action from the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Yahoo Finance’s Editor in Chief Andy Serwer sat down with FCC Commissioner, Brendan Carr to discuss 5G and the strength of the telecommunications industry in the United States during the coronavirus pandemic.
Commissioner of the Federal Communications Commission Brendan Carr talks with Yahoo Finance's eidtor-in-chief Andy Serwer on a range of topics from coronavirus and the FCC's role to the recently passed Secure 5G and Beyond Act.
(Bloomberg) -- SoftBank Group Corp. plans to sell about $14 billion of shares in Chinese e-commerce leader Alibaba Group Holding Ltd. as part of an effort to raise $41 billion to shore up businesses battered by the coronavirus pandemic, according to people with knowledge of the matter.The Japanese conglomerate is considering raising the remainder of the money by selling a stake in SoftBank Corp., its domestic telecommunications arm, as well as part of Sprint Corp. following its merger with T-Mobile US Inc., said one of the people, who requested anonymity discussing private transactions. The Alibaba stake sale could range from $12 billion to as much as $15 billion, the people said.SoftBank’s shares surged as much as 21% in Tokyo Tuesday in their biggest intraday gain since listing, just days after marking a drop of roughly the same magnitude. The reversal comes as founder Masayoshi Son is finally doing what investors have been urging for years -- using his stake in Alibaba for shareholder returns and to pay down debt.Son has set in motion his biggest play yet to silence critics, unveiling the unprecedented plan Monday to unload 4.5 trillion yen ($41 billion) of stock and alleviate investor concerns that at one point shaved more than 40% off SoftBank’s value from a February peak. The company, which also operates the $100 billion Vision Fund, is vulnerable to economic shocks given its enormous debt load and ties to unprofitable startups from WeWork to Oyo Hotels. Many of the Vision Fund’s biggest bets lie in what’s known as the sharing economy, which has been particularly hard-hit by a virus that’s causing millions of people to stay indoors and slash travel spending.“The market sent a strong message and SoftBank has heeded it,” Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma, said after Monday’s announcement. “What’s changed is that this will entail a meaningful sale of Alibaba stake with much of the proceeds going to shareholders,” he added. “SoftBank has never done that before.”Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsWhile SoftBank didn’t specify which assets would be sold, its Alibaba stake is worth more than $120 billion and makes up the largest chunk of unrealized value. It’s unclear what timeframe SoftBank’s looking at -- its stock in Sprint and Hong Kong shares of Alibaba may be subject to lockup periods: one year from listing in Alibaba’s case and up to several years for Sprint, though certain conditions may allow earlier transfers and the company could employ special vehicles to get a deal done. Alibaba’s stock was up as much as 2.7%, reversing early losses on Tuesday in Hong Kong.An Alibaba spokesperson didn’t respond to an emailed request for comment. SoftBank spokespeople in Tokyo and the U.S. declined to comment.SoftBank’s Fire Sale May Erode Stake in Alibaba: Tim CulpanThe Japanese company’s envisioned asset sale would almost match its entire market value last week. Part of the proceeds would go toward a new share buyback program of as much as 2 trillion yen that comes on top of previously announced repurchases.The scale of the endeavor surprised investors and sent SoftBank soaring. Yet even after Monday’s and Tuesday’s combined gain, the stock remains down about 33% from its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.The coronavirus-triggered rout has spread to credit markets and sparked a surge in the cost of insuring debt against default -- including that of SoftBank, whose credit-default swaps touched their highest level in about a decade. Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.Alibaba, Sprint and SoftBank Corp. are worth as much as $190 billion combined, estimates Atul Goyal, senior analyst at Jefferies Group. But Son will want to keep at least a 50% stake in the domestic telecom unit because it’s the only cash-generating asset and its dividends help pay for SoftBank’s interest on debt, he wrote. And since Sprint is going through a merger with T-Mobile, most of the funds will initially have to come from Alibaba, he said.“This buyback is music to our ears,” Goyal said. “But the timing of this announcement is not ideal. We would have ideally preferred such an announcement from a position of strength and not because the SBG stock came under tremendous pressure.”(Updates with Alibaba’s shares from the third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- While the U.S. government and telecommunications industry have been engrossed in the race to 5G, much of the country is still in a slow crawl to regular home internet service. It’s a mistake with economic consequences, and unfortunately the coronavirus pandemic could provide the harshest evidence of that. Americans all around the country are being advised to stay home to slow the spread of the disease. That means adults and children are powering up their computers, laptops and tablets to work and study remotely for the time being, if they can. It’s part of a nationwide social-distancing effort that could go on for weeks or even months, as experts aren’t sure how the health crisis will progress from here. What may be more certain is that the near shutdown of the country’s economy will expose and perhaps exacerbate the digital divide that exists between wealthier cities that have reliable internet access and the many rural towns that don’t. Only 63% of rural Americans have a broadband internet connection at home, compared with 75% of Americans overall, according to a survey conducted by the Pew Research Center early last year. That gap is only a slight improvement on the 16-percentage-point difference that existed 13 years ago. In a separate Pew study in 2018, about a quarter of rural respondents cited access to high-speed internet as a major problem, a far higher proportion than people living in urban areas or suburbs.The digital divide tends to be talked about in terms of being a wealth divide, which it absolutely is. But in rural communities, frustration over internet access is also notably shared across different income and education levels, Pew has found. So even as parts of the country are given no choice but to work from home, many that should have the ability don’t. In a similar vein, suburban kids using iPads to attend digital classes or learn from online tutors won’t have the same interruption to their education as children in rural or less well-off areas, where a greater burden may in turn be placed on parents.There’s also a problem within the problem: Nobody really knows exactly how many rural Americans are without high-speed internet, leaving it to guesswork through surveys. That’s due to a lack of useful coverage maps showing what areas have broadband access. During a panel last July about rural broadband challenges, Eric Koch, a Republican state senator from Indiana, said that when a broadband provider “serves” an area, that might mean one customer or a thousand. There’s also a disagreement over what “access” even means. The Federal Communications Commission measures it in terms of those with minimum internet download speeds of 25 megabits per second and at least 3 megabits per second for uploads. About 21 million Americans couldn’t access such connections as of 2017, the latest data available from the FCC. Faster speeds of 100 Mbps — which is what households using multiple devices really need — were deployed to only 58.6% of the rural population, compared with 88.5% of the U.S. overall.What makes this all the more maddening is that the country’s broadband problem has been willfully overshadowed by the fascination of late with 5G, the faster next generation of wireless networks that is being rolled out by carriers such as Verizon Communications Inc., AT&T Inc. and T-Mobile US Inc. FCC Chairman Aji Pai was giddy in throwing his support behind T-Mobile’s takeover of Sprint Corp. last year, citing the 5G possibilities and asking for weak concessions in return. The deal brings together the two low-cost carriers in an already highly concentrated market that’s trying to regain pricing power over consumers. “Carriers and the FCC are so obsessed with the next thing (5G), they’ve not ensured that everyone who needs access to the network can get it or afford it,” Gigi Sohn, a distinguished fellow with the Georgetown Institute for Technology Law & Policy and a former FCC official, said in an email Thursday.Even with 5G, more densely populated areas are being prioritized, where there are more structures upon which to affix the boxes that serve as mini cellular towers. Delivering 5G to smaller towns is more costly and cumbersome relative to the amount of customers that would be served, which means there’s little incentive to build there.The FCC will say there has been much progress made in closing the digital divide and that lots more work is being done. But it hasn’t been happening nearly quickly enough, and now a pandemic has paralyzed the country. Where you live could determine how you come out on the other side of it. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp. shares fell the most since 2012 after S&P Global Ratings cut its outlook to negative, as investors grow increasingly skittish about the company’s prospects with global markets in tumult.The credit-rating agency said the Japanese conglomerate’s plan to spend up to 500 billion yen ($4.7 billion) buying back shares amid plummeting markets raises questions about its commitment to sound financial practices. The company’s shares dropped as much as 12%, the most intraday since October 2012. The agency did affirm the company’s long-term issuer BB+ rating.SoftBank said it would buy back as much as 7% of its shares last week, taking a step advocated by activist investor Elliott Management Corp. to boost stockholder value. But the move has done little to reassure investors, with the stock down more than 15% since the announcement.“The buyback plan is likely to weigh on SoftBank Group’s credit quality because it strongly underscores its aggressive financial management,” S&P’s Hiroyuki Nishikawa and Makiko Yoshimura wrote in a research note. “Under normal circumstances, the current rating would likely tolerate the impact of a share buyback of this scale. But the buyback follows a plan announced in October 2019 to provide extensive financial support to U.S.-based investee WeWork Companies LLC. It also comes amid large falls in stock prices.”SoftBank Group’s market value has tumbled to about 6.98 trillion yen, about the same as SoftBank Corp., the domestic telecom operation that sold stock to the public last year. SoftBank Group still owns about two-thirds of the unit.“The company may struggle to maintain a level of financial soundness that is commensurate with the rating if stock prices remain volatile and result in a sharp drop in the value of its investment assets,” the S&P analysts wrote. Just after the S&P move, news emerged that SoftBank has told shareholders of WeWork that it could withdraw from an agreement to buy $3 billion of stock in the embattled co-working business, casting doubt on a deal that had been set to close in about two weeks.In a message to stockholders reviewed by Bloomberg News, the Japanese conglomerate cited numerous government inquiries into WeWork, including those from U.S. attorneys, the Securities and Exchange Commission, attorneys general in California and New York and the Manhattan district attorney.The WeWork stock purchase was part of a rescue financing from SoftBank after WeWork’s failed initial public offering last year. SoftBank already invested $1.5 billion as part of the bailout in October and is looking to arrange billions of dollars more in debt.S&P’s BB+ rating on SoftBank put it at the highest non-investment grade, same as Moody’s Ba1. Japan Credit Rating Agency ranks it at A-, or four levels above junk. Both Moody’s and JCR have a stable outlook on the company.SoftBank had 19.25 trillion yen of interest-bearing debt as of Dec. 31, a 23% increase since the start of the fiscal year in April. Sprint Corp.’s imminent merger with T-Mobile will lighten the load by about 4.9 trillion yen. The company had 3.8 trillion yen of cash and equivalents, while more than 2.6 trillion yen of bonds are coming due in the next three years.(Updates with SoftBank market value in fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp. plans to spend up to 500 billion yen ($4.8 billion) buying back as much as 7% of its shares, taking a step advocated by activist investor Elliott Management Corp. to boost stockholder value.The re-purchases will run from March 16 through March 15, 2021 and the shares will be retired, the company said Friday. SoftBank’s shares fell despite the announcement, dropping as much as 9.2% along with the broad market decline.The scale however falls far short of Elliott’s envisioned amount. The activist investor disclosed a stake of almost $3 billion in SoftBank in February, arguing the company’s shares were substantially undervalued given assets including a stake in Chinese e-commerce giant Alibaba Group Holding Ltd. Elliott advocated for a share buyback of as much as $20 billion, along with governance changes and more transparency about its investments.Elliott said in a statement Friday it supported the move and called the initial buyback an “important first step in addressing the company’s undervaluation.” It said SoftBank should have opportunities to pursue additional buybacks after the merger between SoftBank-backed Sprint Corp. and T-Mobile US Inc. is completed.“Elliott trusts that SoftBank’s leadership will continue to build upon today’s progress and its demonstrated commitment to value creation,” it said.Founder Masayoshi Son has also argued his shares are undervalued, and SoftBank itself calculates its stock may be worth more than double the current price. But the Japanese company’s portfolio of startups -- which includes struggling names like WeWork and Oyo Hotels -- remains particularly vulnerable to economic and market shocks from the coronavirus pandemic. The investment giant’s five-year senior credit default swaps -- a hedging tool that indicates the risk of a company going under -- spiked on Thursday to their highest levels since 2016.“The buyback continues SoftBank’s practice of re-purchases following large drops in the share price,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Given the long drawn-out acquisition period, it is unlikely to provide much support in the market driven by emotions.”Read more: SoftBank Falls Most in 7 Years After Virus Erases Elliott GainsThe past 12 months have been tumultuous for Son and SoftBank. The company unveiled a record buyback in February 2019, sparking a rally that pushed shares to the highest since its dot-com peak in 2000. Uber Technologies Inc.’s disappointing public debut and the implosion of WeWork wiped out the gains over the next few months. But SoftBank surged again after Elliott disclosed its stake and Son won approval to sell his Sprint Corp. to T-Mobile US Inc. The latest buyback comes as all of the gains from the activist’s involvement have been wiped out by the growing fears around the coronavirus pandemic.“Given the spread between what we consider to be the fair value of our company and growing market volatility, we decided on this policy for shareholder return,” SoftBank spokesman Kenichi Yuasa said. “The amount reflects consideration of liquidity on hand and financial stability.”Investors have grown increasingly wary about SoftBank’s and the Vision Fund’s holdings in startups that have enjoyed abundant liquidity in past years. Son met with fund managers and financial institutions in New York City this month, arguing that recent market declines were an opportunity to invest at discounted valuations. But global economic uncertainty has strained fundraising and stoked worries that startup valuations are stretched -- particularly in sectors vulnerable to the outbreak such as ride-hailing and travel.Read more: SoftBank Ratchets Up D.C. Lobbying to Boost Its StartupsElliott wants SoftBank to set up a special committee to review processes at the Vision Fund, the world’s largest single investment pool for tech startups. Investor Paul Singer’s firm argues the fund has dragged down the share price despite making up a small portion of assets under management, people familiar with the discussions have said.The activist has also pushed SoftBank to sell some of its stake in Alibaba to pay for a buyback. But Son said during SoftBank’s latest quarterly financial briefing he’d prefer to sell as little as possible and that there’s “no rush” to do so.Instead, SoftBank last month announced plans to borrow as much as 500 billion yen by putting up shares of its Japanese telecom unit as collateral, renewing questions about the Japanese conglomerate’s massive debt pile. SoftBank said the money will come from 16 financial institutions and pledged as much as 953 million shares of SoftBank Corp.SoftBank had 19.25 trillion yen of interest-bearing debt as of Dec. 31, a 23% increase since the start of the fiscal year in April. Sprint’s imminent merger with T-Mobile will lighten the load by about 4.9 trillion yen. Still, SoftBank may find it a challenge to balance shareholder returns with big-ticket investments in technology companies. The company had 3.8 trillion yen of cash and equivalents, while more than 2.6 trillion yen of bonds are coming due in the next three years.“Son is sending a message that the stock in cheap,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. Considering how much the overall market has plunged, “you could say that investors have received Son’s signal.”(Updates with Elliott comment in fourth paragraph)\--With assistance from Takahiko Hyuga, Yuki Furukawa and Scott Deveau.To contact the reporter on this story: Pavel Alpeyev in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Vlad SavovFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Masayoshi Son’s Midas touch has been wearing off lately. The SoftBank Group Corp. chief executive officer is seeing some of the company's largest investments crumble while struggling to raise a new technology fund and keep an activist investor at bay. On Wednesday, he made a rare appearance on Twitter to propose a solution to the shortage of coronavirus tests. The plan was immediately panned, and Son quickly walked it back.However, there’s one part of Son’s team where the charm offensive looks like it’s working: SoftBank’s Washington lobbying operation. The Japanese conglomerate known for flooding the world of technology startups with cash—sometimes billions of dollars in a single funding round—is now wielding its wallet in D.C. The company’s lobbying bill climbed to $1.94 million in 2019, a step up from $225,000 in 2018, according to filings with Congress. That spending, which doesn’t include lobbying by its subsidiaries, is far lower than that of American tech giants like Amazon.com Inc. or Facebook Inc., but is more than double the amounts for Netflix Inc. or PayPal Holdings Inc. Of the 10,000 or so organizations that report lobbying every year, the Center for Responsive Politics says, SoftBank ranks among the top 4% of spenders. “Two million is a lot in Washington,” said Dan Auble, a senior researcher at the Center for Responsive Politics, even though that can look like a small sum for the tech industry. In D.C., he said, "a relatively modest expenditure can have a big return."SoftBank’s Washington push represents a new interest in politics for the company. For the three years prior to 2018, it had virtually zero U.S. lobbying expenditure. Now, as the company grapples on other fronts with activist investor Elliott Management and under-performing investments in companies like Uber Technologies Inc. and WeWork, it also has plenty of reasons to be in D.C. SoftBank’s recently assembled team of seasoned lobbyists is advocating for both the parent company, as well as the dozens of startups that it's invested in, a roster whose policy wish lists encompass topics ranging from self-driving cars to commercial spacecraft. SoftBank started staffing up in D.C. two years ago when it hired Ziad Ojakli away from his post as the chief lobbyist at Ford Motor Co., and began contracting with lobbying firm Carmen Group. Last year, SoftBank registered four in-house staffers as lobbyists, and added two respected shops, Fierce Government Relations and Subject Matter, to its roster of outside firms.Today, SoftBank is on the cusp of a major victory. The hotly contested $26 billion sale of SoftBank-owned Sprint Corp. to T-Mobile US Inc. had been mired in regulatory and legal challenges. Now, after approval last year by the Federal Communications Commission and the Justice Department, along with defeating a lawsuit brought by more than a dozen states, the deal is set to close. The clearance required substantial legal resources, separate from lobbying, devoted to the lawsuit. Ojakli, SoftBank’s global government affairs officer, said his staff had advocated for the merger over the course of months of conversations with members of Congress, FCC officials and representatives for the Justice Department. “We helped make the case to the government that it was going to be incredible for the U.S. in terms of 5G,” Ojakli said, referring to the next generation of mobile broadband. “The spadework was what allowed us to succeed ultimately in court.” SoftBank’s efforts helped along those of T-Mobile, which spent an additional $8.92 million on lobbying last year, according to filings, and Sprint itself, which spent $3.49 million. And as with all lobbying spending disclosures, the official figures rarely encompass all of a company’s expenditures in Washington, including legal fees, advertising and other forms of soft influence.Beyond megamergers, Ojakli said the bulk of SoftBank’s lobbying is spent advocating for its portfolio of startup investments. “Really, most of the time in our lobbying work, we have to deal with the smaller ones,” he said. Typically, younger companies have neither the connections nor resources to argue their interests in Washington. Startup executives are often “triple-hatting” in different jobs, Ojakli noted, leaving them little time to ponder how to navigate D.C.Starting last year, SoftBank’s disclosure filings showed lobbying activity around autonomous vehicles, where the company has made several investments via its $100 billion Vision Fund. Those investments include Uber and General Motors’ Cruise LLC. But one of the smaller companies it has backed, Nuro Inc., recently won a significant regulatory greenlight. The National Highway Traffic Safety Administration granted Nuro an exemption from a rule requiring features such as windshields for a new fleet of low-speed delivery vehicles that Nuro calls R2s. Now, Nuro is rolling out R2 testing in Houston that will soon include Domino's pizza deliveries.The victory stemmed not so much from traditional lobbying as from a "technocratic process," said Matthew Lipka, Nuro's Washington-based head of autonomous vehicle policy. Ojakli celebrated the victory, calling the exemption a "terrific, terrific outcome." Nuro and SoftBank staff are focused on updating autonomous-vehicle rule-making overall at the federal level, Lipka said, a process that can take eight to 10 years per rule, and which involves members of Congress as well as Transportation Department officials. A spokesman for the NHTSA said the agency’s decision-making hinges on a “safety equivalence evaluation, performed by safety engineers and attorneys,” and “is based on objective standards and legal requirements.” The process ignores "non-relevant factors," he added.It’s been helpful for Nuro to work with SoftBank in Washington, Lipka said. “SoftBank is a partner with us,” he said. “They have a lot of expertise.” The company’s Washington team can augment Nuro’s strategy, for example by tapping existing relationships with different members of Congress, Lipka added, “It’s helpful to have another voice.” Nuro spent $120,000 on lobbying last year, via outside firm Mehlman Castagnetti Rosen & Thomas Inc.Another beneficiary of SoftBank’s work in Washington: Plenty Unlimited Inc., an indoor farming company that raised its profile considerably in 2017 when the Vision Fund led its $200 million funding round. At the time, it was an extraordinarily large investment for an agricultural technology startup, but a relatively modest sum for the fund. Last year, “we arranged for Sonny Perdue to come out and see Plenty first-hand,” Ojakli said about the secretary of agriculture. SoftBank lists the Agriculture Department as a target agency on its lobbying disclosure forms, and Ojakli said he was pleased when in January this year, after intense efforts by industry groups, the department won $5 million in congressional funding to set up a new office for Urban Agriculture and Innovative Production. The office’s mission includes promoting urban and indoor agriculture, which could help Plenty. Plenty declined to comment.SoftBank is also hoping for wins in a few other areas. Like space, for example. SoftBank put in the lion’s share of the $3.4 billion raised by OneWeb, a British satellite maker, and has listed “commercial space issues” as a topic of interest on each of its three lobbying disclosure forms for last year.OneWeb could benefit if the FCC signs off on a plan to allow it to provide U.S. internet access from more satellites. However, Ojakli said his team has advised OneWeb from a broad strategic perspective rather than work on any single issue. “We are grateful to SoftBank for providing guidance and support as we look to share the OneWeb story across the government,” said a spokeswoman for the startup. SoftBank also lobbied last year on financial technology, an area where it holds investments including Lemonade and Kabbage; life sciences, where its bets include Zymergen Inc.; workplace technology, where it has backed Automation Anywhere Inc.; and artificial intelligence, an industry that undergirds Son’s investing thesis, and where it has funded companies including Mapbox Inc. and SoftBank Robotics Group. Not all of SoftBank’s efforts go the way it hoped. Take its work on renewable-energy tax credits, which it says would benefit portfolio company View Inc., in which the Vision Fund has invested $1.1 billion. The startup makes glass walls that automatically darken and lighten to keep sunlight in or out as required, saving on heating and cooling bills. Congress didn't include tax credits for dynamic glass in its December spending legislation. “It was a bummer we didn’t get it across the finish line,” said Ojakli. “We ran out of time more than anything.” View has also worked with Washington lobbyist Cassidy & Associates over the last five years. View declined to comment.Besides its varied startup investments, Ojakli and his team also advocate on behalf of SoftBank itself, which as a Japanese company is subject to additional rules and restrictions on its U.S. activities. Ojakli’s staff must contend with the Committee on Foreign Investment in the U.S., an interagency body with authority to review foreign investments in American companies. CFIUS isn’t listed on official forms as an agency that lobbyists can try to influence, unlike its component agencies such as the Treasury Department. The group is tasked with making sure foreign acquisitions of American businesses don’t hurt national security, and has final say over many SoftBank deals, including its bailout package of WeWork parent We Co. last year.“We’re the most frequent customer of CFIUS by far,” quips Ojakli, whose team works alongside SoftBank’s legal team on fielding CFIUS inquiries and meeting with its staff. “We’re coming at it from the perspective of being a U.S. ally that wants to invest in some of the most innovative companies in the U.S.”CFIUS has become more powerful since Donald Trump was elected president in 2016, but that’s a person Son has done a little lobbying with on his own. A month before Trump’s inauguration, Son met with him at Trump Tower in New York, and announced SoftBank would invest $50 billion in U.S. businesses over an undisclosed time frame. “We’re well on our way to meeting that commitment,” Ojakli said.To contact the authors of this story: Sarah McBride in San Francisco at firstname.lastname@example.orgBen Brody in Washington at email@example.comTo contact the editor responsible for this story: Anne VanderMey at firstname.lastname@example.org, Andrew PollackMark MilianFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The call-blocking company used by many of the big carriers, Transaction Network Services, reports that they've been seeing an emerging trend of coronavirus-related robocalls and scams.
(Bloomberg) -- TurboTax has long been the leader in do-it-yourself tax-filing software. But it has faced increasing competition from a nimble startup, Credit Karma Inc., which has become one of the preferred financial apps for young people by giving out free credit scores and helping them find auto loans and credit cards. And since 2017, it has offered a completely free tax-filing service. Intuit Inc., the parent company of TurboTax, took note and agreed to spend $7.1 billion to buy Credit Karma last week. Several legal experts say the deal raises serious antitrust concerns, and see parallels to a 2011 attempt by H&R Block Inc. to acquire another DIY tax software company that regulators blocked.The prospect for tech deals may be even weaker now, amid calls for greater federal scrutiny. Increasingly, legal experts are flagging concerns about the harms posed by large companies buying smaller ones before they develop into serious threats.Intuit is the biggest provider of DIY tax filing software in the U.S., splitting about 80% of the market with H&R Block, according to Bloomberg Intelligence analyst Julie Chariell. Credit Karma’s market share is only 3%, but it’s growing fast. Founded in 2007, the San Francisco-based company has attracted more than 100 million users, including about half of all U.S. millennials. That’s twice as many as Intuit. Credit Karma’s free tax-preparing business grew by about 50% last year, according to the company.“There's no question the acquisition could and should face scrutiny,” said Aaron Edlin, a law and economics professor at the University of California at Berkeley. “There's a huge concern when the leading firm in an industry such as tax software buys another firm that is competitive, particularly that's offering free tax software.”Eleanor Fox, a law professor at New York University, said regulators wouldn’t just be looking at the companies’ size, but could also be concerned about whether the deal is “cornering a market.”Intuit has told investors the Credit Karma deal should be finalized by the second half of the year, a sign that it’s optimistic it can pass an antitrust review. The company argues that taxes are only one part of Credit Karma’s offerings, which mostly revolve around selling financial products based on the data it collects from free services, including tax filings. Intuit says the deal isn’t about stifling competition and that the two companies would operate separately. When asked on a conference call about market consolidation, Chief Executive Officer Sasan Goodarzi said, “This is all about playing offense and delivering for customers.”Representatives for the Justice Department, Intuit and Credit Karma declined to comment.In Intuit’s latest annual financial report, it lists Credit Karma as a primary U.S. competitor. Some customers certainly see it that way. One person complained on Twitter about TurboTax’s charges. “My kids make like 2k last year but because she made 401k contributions she has to pay $80 to get a $200 refund. No thanks, @creditkarma to the rescue.”Matt Stoller, the director of research at the American Economic Liberties Project, called it “embarrassing” that Intuit even proposed the merger. “These kinds of mergers are obviously illegal and enforcers just don't uphold the law,” he said.In 2011, a court sided with the Justice Department and prevented H&R Block, the second largest player in digital do-it-yourself tax preparation software, from buying its third-place rival, the creator the software “TaxAct.” In that case, Judge Beryl Howell ruled that the proposed merger would give H&R Block and Intuit a combined 90% control over the tax market.Barak Orbach, a law professor at the University of Arizona, said he believes the Credit Karma acquisition will be approved since it could help create competition with the tech giants, who are moving further into financial products. And, despite the tough stance taken by regulators against big tech companies, T-Mobile US Inc. recently won approval for its $26.5 billion takeover of Sprint Corp. after a state-led lawsuit that sought to block the deal. Even before the Credit Karma acquisition, the government was scrutinizing Intuit’s actions. The company is facing lawsuits and regulatory inquiries into its approach to the Internal Revenue Service’s Free File tax program. That federal program -- not to be confused with software that’s advertised as free -- is meant to provide low-income people truly free tax software. ProPublica has reported that Intuit hid its federal free file program in search results and redirected people to its commercial service. Intuit subsequently agreed to stop the practice.The antitrust review of Credit Karma will likely hinge on a few points, said James Tierney, who supervised the case against H&R Block at the Justice Department: "Is this company restraining Intuit's pricing? If you got rid of Credit Karma, could Intuit raise prices? That's one question and the other question might be, is Credit Karma driving innovation in the market?"Tierney, now an attorney at Orrick, said the Justice Department was unlikely to take Intuit by its word that Credit Karma would operate independently. "The fact of the matter is that Intuit will control Credit Karma and they have the ability to do whatever they want with it," he said. (Updates with comments from law professor in sixth paragraph. A previous version of the story corrected the formal name of the Internal Revenue Service in third paragraph from the end.)\--With assistance from Julie Verhage.To contact the author of this story: Eric Newcomer in New York at email@example.comTo contact the editor responsible for this story: Molly Schuetz at firstname.lastname@example.org, Joshua BrusteinFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- In Finland’s epic national poem, the Kalevala, a hero is tasked with retrieving the mythical sampo, a mill capable of producing salt, meal and gold that is a talisman of happiness and prosperity.It’s a task that now befalls Pekka Lundmark, the executive appointed chief of Nokia Oyj on Monday with a mandate to return the troubled Finnish network-equipment maker to more prosperous times.The time is right for his predecessor Rajeev Suri to hand over the reins. Appointed head of Nokia’s networks division in 2009, Suri became CEO in 2014 as that business became the firm’s main operation after the sale of the handset arm to Microsoft Corp. He has overseen the reshaping of a company that at the dawn of the millennium was one of the world’s biggest, with a market capitalization peaking at $290 billion in 2000, and the pride of Finnish industry.By acquiring French rival Alcatel-Lucent in 2016, he ensured that Nokia remained one of the top three suppliers of telecoms equipment, even as China’s Huawei Technologies Co. spent aggressively to leapfrog it and Sweden’s Ericsson AB to become the biggest player.But that takeover also caused problems for which Suri now seems to be paying the price. Nokia’s revenue grew more slowly than either of its two biggest competitors last year. Difficulties integrating the French company proved a distraction as the telecommunications industry started developing fifth-generation network technology. Carriers complain that Nokia now lags Ericsson and Huawei technologically, and the Finnish firm has struggled to compete on cost. Suri will hand over the reins in September. Chairman Risto Siilasmaa said Nokia aims to resolve shortcomings in the semiconductors used in its base stations this year, which ought remedy some of the tech concerns. Siilasmaa already planned to step down, to be replaced in April by Sari Baldauf.All of those missteps had helped drive shares of Nokia in its current form close to their all-time lows as a multiple of expected earnings. The stock was trading at less than 14 times forward earnings before the management change was announced. It traded as high as 29 times earnings on that basis in Suri’s first year at the helm.That downward trajectory makes Nokia vulnerable to an approach from an activist investor who could seek a breakup of the company. Replacing the CEO might help the company get ahead of the problem. And it surely can’t be a coincidence that Lundmark’s appointment follows that of Baldauf as chair of Nokia’s board: While in the same role at Fortum Oyj, she appointed Lundmark to his current job as CEO of the Finnish utility. Under his leadership, the firm has outperformed its European peers, generating an 80% return for shareholders.One recent event will give Lundmark some breathing space: U.S. regulators’ decision to approve the acquisition of Sprint Corp. by rival carrier T-Mobile US Inc. The delayed deal, which was first agreed two years ago, has meant that some spending decisions have also been pushed back. Both companies are big Nokia customers, which might help earnings this year.But Lundmark might also learn from the Kalevala. In the poem, the quest results in a fight that sees the sampo smashed into little pieces. Lundmark has been made responsible for determining Nokia’s strategy, which will include deciding whether Suri’s approach to offering an “end-to-end” network solution still makes sense, or whether some businesses are worth divesting. If he dithers, then activists might take the decision out of his hands and lead Nokia to a sampo-like fate.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Masayoshi Son’s pitch to U.S. hedge funds and financial institutions on the merits of SoftBank Group Corp. just got harder, with a record market plunge that has made investors skittish and raised risks for its portfolio companies.The Japanese billionaire will be in New York for the first such meeting since the implosion of WeWork. In the months since, Paul Singer’s Elliott Management Corp. took a stake in SoftBank, arguing the Japanese company’s shares are undervalued compared with its assets.At Monday’s event, organized by Goldman Sachs Group Inc., Son will have to make his case after the fastest market correction on record over concerns of the coronavirus. That may make it more difficult for the money-losing startups he has backed -- like Didi Chuxing, Grab and Oyo -- to go public. It may also heighten concerns about SoftBank’s massive debt load.Son, 62, is likely to point to the approved sale of Sprint Corp., a rally in Uber Technologies Inc. shares and Elliott’s purchase of SoftBank stock as signs of improving fortunes. Convincing investors the tide has turned will hinge on a handful of key questions.How Will He Respond to Elliott?Speaking at an earnings briefing on Feb. 13, Son called the New York-based activist investor an “important partner” and said he’s in broad agreement with Elliott’s arguments for buybacks and increasing the stock price. Son has signaled less receptiveness to Elliott’s other suggestions: selling more of the stake in Alibaba Group Holding Ltd. and reining in the Vision Fund, a $100 billion investment vehicle that accounted for more than $10 billion of losses in the past two quarters.Son is personally handling interactions with Elliott, according to a person familiar with the matter. Chief Financial Officer Yoshimitsu Goto, Chief Operating Officer Marcelo Claure, head of the Vision Fund Rajeev Misra, and SoftBank Group’s Robert Townsend are also closely involved, the person said, asking not to be identified because the details are private.The news of Elliott’s stake, which people familiar with the matter have said is a nearly $3 billion, sent SoftBank’s shares up the most in a year, but they have since retreated over 10%. It’s not clear whether representatives from Elliott will be at the Monday event, which was scheduled before the activist investor disclosed its stake and is not designed to specifically address its involvement.Will He Fund a Big Buyback?Elliott has called for a buyback of as much as $20 billion, which would be several times SoftBank’s biggest repurchase to date. The company’s last buyback was its biggest at 600 billion yen ($5.5 billion). Announced in February 2019, it sparked a rally that pushed the stock to its highest price in about two decades.Selling Alibaba shares to pay for a buyback, as Elliott has proposed, could be a point of contention with Son. In the past, Son has used its stake as collateral to borrow money for big acquisitions, including the $32 billion purchase of chip designer ARM Holdings. Son said during SoftBank’s latest quarterly financial briefing that he’d prefer to sell as little as possible and that there’s “no rush” to do so.While Elliott and SoftBank have yet to discuss specific amounts, a buyback is an easy sell for Son, since one was already in the works before the activist’s involvement, the person familiar said. SoftBank has also stoked expectations when it announced on Feb. 19 plans to borrow as much as 500 billion yen by putting up shares of its Japanese telecom unit as collateral.How Risky is SoftBank’s Debt Load?The loan has raised questions about SoftBank’s massive debt pile. SoftBank said the money will come from 16 financial institutions and pledged as much as 953 million shares of SoftBank Corp. as collateral. Overseas banks will provide the bulk of the margin loan, with JPMorgan Chase & Co. and Credit Suisse Group AG contributing 68 billion yen each, the Nikkei reported.“It’s very worrisome that to raise just a few billion dollars of debt, Son had to go to a dozen banks. On top of that they had to put up collateral worth $15 billion,” said Atul Goyal, senior analyst at Jefferies Group. “It looks like Japanese banks are worried about concentration risks.”SoftBank had 19.25 trillion yen of interest-bearing debt as of Dec. 31, a 23% increase since the start of the fiscal year in April. Sprint’s imminent merger with T-Mobile will lighten the load by about 4.9 trillion yen. Still, SoftBank may find it a challenge to balance shareholder returns with big-ticket investments in technology companies. The company had 3.8 trillion yen of cash and equivalents, while more than 2.6 trillion yen of bonds are coming due in the next three years.What is the Vision Fund’s Future?The Vision Fund is recovering from a series of stumbles. WeWork’s plan to go public last year imploded, forcing SoftBank to arrange a rescue financing of $9.5 billion in October. Uber, despite a recent surge, is trading about 24% below last year’s offering price. The fund has suffered other high-profile setbacks, including investments in failed online retailer Brandless Inc., dog-walking app Wag Labs Inc. and pizza robot company Zume Pizza Inc.Elliott wants SoftBank to set up a special committee to review investment processes at the Vision Fund. It also argues the fund has dragged down the share price despite making up a small portion of assets under management, said people familiar with the discussions.Son himself has conceded that missteps with the original fund are making it difficult to raise money for a successor. He said in February that SoftBank may need to invest in startups using solely its own capital for a year or two.“Vision Fund 1 companies will need more cash and many of them will not be able to get it at the same valuation, which means more losses for SoftBank,” Jefferies’ Goyal said. “Without a second Vision Fund, how will these companies get funding?”Will He Improve Governance?Some at SoftBank are resistant to the idea of an oversight committee. Instead, SoftBank is seeking to resolve issues at the Vision Fund with new governance standards for the companies it invests in. The new rules will encompass how the fund approaches the composition of the board of directors, founder and management rights, rights of shareholders, and mitigation of potential conflicts of interest.SoftBank recognized the need for more oversight as early as 2018, when it charged Claure with a broad review of operations across SoftBank companies. The COO, formerly the head of Sprint, spent months assembling a team of about 40 executives. In the end, he was forced to cede control of the so-called SoftBank Operating Group to Misra, the head of the fund it was supposed to be overseeing.Will He Support Rajeev Misra?The spat was only the latest in a string of internal conflicts centered on Misra, the veteran Wall Street trader who once ran the Deutsche Bank subprime team immortalized in “The Big Short.” News reports alleged that Misra masterminded attacks that led to the departures of SoftBank President Nikesh Arora and Alok Sama, a contender for Misra’s position at the Vision Fund. The latest revelations in a Wall Street Journal story last week detailed an alleged smear campaign that included a $500,000 payment to a shadowy Italian businessman who had worked with private intelligence operatives and computer hackers, and attempts at sexual blackmail.“If these allegations are true, Misra has damaged not only his own reputation, but that of SoftBank as a whole,” Goyal said. “Mr. Son will do well to address this ASAP.”SoftBank’s board of directors had previously completed a review of allegations about Arora and concluded the claims are without merit. The company also said that it is looking into latest details.“Misra could be the sacrificial lamb,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Throwing him under the bus would certainly send a signal that things are changing.”(Updates with market drop from first paragraph. A previous version of this story corrected the seventh paragarph to show SoftBank shares rose the most in a year, not to the highest in a year.)To contact the reporters on this story: Pavel Alpeyev in Tokyo at email@example.com;Takahiko Hyuga in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Giles Turner, Nate LanxonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
NEW YORK, Feb. 27, 2020 -- Bragar Eagel & Squire, P.C., a nationally recognized shareholder law firm, is investigating certain officers and directors of AT&T, Inc..
U.S. stocks sold off on Friday as a spike in new coronavirus cases in China and other countries and as data showing U.S. business activity stalled in February fueled investors' fears about the economy. Declines on Friday were led by heavyweights Microsoft Corp , Amazon.com Inc and Apple Inc for a second straight day. Chipmakers, with strong ties to China for revenue, also fell sharply, with the Philadelphia Semiconductor index falling 3%.
U.S. stock indexes fell on Friday after data showed U.S. business activity stalled in February, while a spike in new coronavirus cases in China and elsewhere sent investors scrambling for safer assets such as gold and government bonds. Declines on Friday were led by heavyweights Microsoft Corp , Amazon.com Inc and Apple Inc for a second straight day.
(Bloomberg) -- T-Mobile US Inc. and Sprint Corp. agreed to new terms for their pending merger that take account of the slide in Sprint shares since the transaction was first agreed, putting the industry-altering deal a step closer to completion.T-Mobile owners will get roughly 11 shares of Sprint for each of their stock, the companies said Thursday. That’s an increase from a ratio of 9.75 previously and is more favorable for T-Mobile’s German owner Deutsche Telekom AG.The equity value of the amended deal is about $37 billion compared with the original agreement of $26.5 billion, according to Bloomberg Intelligence analyst Erhan Gurses. The higher valuation partly reflects the 62% gain in T-Mobile shares since the all-stock transaction was announced almost two years ago, despite the deterioration in Sprint’s business.Getting one of the biggest U.S. wireless mergers ever over the finish line would be a boon for Deutsche Telekom as it will reduce its reliance on Europe, where carriers are struggling to grow amid fierce competition. T-Mobile makes up more than half of Deutsche Telekom’s sales, up from about a third in 2014. A completed deal will also benefit Sprint owner SoftBank Group Corp. by allowing its chairman, Masayoshi Son, to better focus on his technology investments and the $100 billion Vision Fund.The combined company, which will operate under the T-Mobile name, will have a regular monthly subscriber base of about 80 million -- in the same league as AT&T Inc., which has 75 million subscribers, and Verizon Communications Inc., which has 114 million.When the transaction closes, which could happen as soon as April 1, Deutsche Telekom is expected to keep 43% of the merged entity, while SoftBank has 24%. The rest will be held by public shareholders.Deutsche Telekom shares fell 1.3% to trade at 16.41 euros in Frankfurt. Sprint shares were up 5% to $9.96 at 11:01 a.m. in New York, while T-Mobile was down 1.8% to $97.73.The original accord, which united the third- and fourth-largest U.S. wireless carriers, was forged in April 2018. That pact lapsed on Nov. 1, and the companies didn’t initially renew the terms while they fought for government approval. When a federal judge rejected a state lawsuit to block the transaction earlier this month, that put the talks on the front burner.Along the way, Sprint’s condition has worsened. That added pressure to redraw the agreement so that it was more favorable to Deutsche Telekom.SoftBank agreed to surrender 48.8 million T-Mobile shares that it will acquire in the merger to the combined company immediately after the transaction closes. But those shares could be reissued to SoftBank by 2025 if the new company’s stock stays above $150 for a period of time.That arrangement -- having SoftBank relinquish the stock after the deal closes -- was structured so that the deal wouldn’t have to go before another shareholder vote.Sprint investors other than SoftBank will still get the original ratio of 0.10256 T-Mobile shares for each Sprint share -- the equivalent of about 9.75 Sprint shares for each T-Mobile share.Sprint’s monthly churn -- a closely watched measure of how many customers leave -- has risen to nearly 2%. That means roughly a quarter of its subscriber base is quitting the carrier each year. And the company isn’t making up for the decline by charging more: Average revenue per customer has fallen 5% since the deal was announced.Analysts such as LightShed Partners’ Walt Piecyk said the merger’s exchange ratio should be closer to 12, given Sprint’s deteriorated business.(Updates with valuation detail in third paragraph, updates share prices.)To contact the reporters on this story: Scott Moritz in New York at firstname.lastname@example.org;Stefan Nicola in Berlin at email@example.comTo contact the editors responsible for this story: Nick Turner at firstname.lastname@example.org, Jennifer RyanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
U.S. stock index futures lurched downwards on Friday as a spike in new coronavirus cases in China and elsewhere sent investors scrambling for safer assets such as gold and government bonds. The risk-off mood was exacerbated by data showing Japan's factory activity suffered its steepest contraction in seven years in February, underlining the risk of a recession in the world's third-largest economy as the outbreak takes a toll on global growth. With massive disruptions in supplies from China, parts shortages are hitting businesses as far away as the United States.
(Bloomberg) -- Masayoshi Son will head to New York next month for the first time since the implosion of WeWork, seeking to persuade hedge funds and institutional investors that the fortunes of SoftBank Group Corp. have turned since the disastrous investment.The Japanese billionaire is scheduled to address investors on March 2. There, he could point to the approved sale of Sprint Corp., a rally in Uber Technologies Inc. shares and Elliott Management Corp.’s purchase of SoftBank stock as signs of progress at his company, said people familiar with the plans. It’s unclear where WeWork will fit into the agenda.Within SoftBank, there’s disagreement about how to convey the company’s strategy. Son, 62, is known for his eccentric financial presentations, which have included a “hypothetical illustration” of WeWork profitability and stock photos of ocean waves and calm waters. One memorable slide from 2014 contained only a drawing of a goose and the words: “SoftBank = Goose.” Many staff at headquarters in Tokyo love the founder’s showmanship, but some senior executives are exasperated and argue a clearer and more sober message is needed, said people familiar with internal discussions who asked not to be identified because the matter is private.Ultimately, Son will decide. He has downplayed any pressure from Elliott, a New York-based activist investor that disclosed a nearly $3 billion stake in SoftBank this month. Son called Elliott an “important partner” and said he’s in broad agreement with the investor’s arguments for buybacks and increasing the stock price. Son has signaled less receptiveness to Elliott’s other suggestions: selling more of the stake in Alibaba Group Holding Ltd. and reining in the Vision Fund, a $100 billion investment vehicle that accounted for more than $10 billion of losses in the past two quarters.In private meetings with SoftBank, Elliott raised issues over the clarity of SoftBank’s strategy, people familiar with the talks said. SoftBank is planning to make hires within its investor relations department to help shape the message to shareholders. SoftBank declined to comment. A spokesperson for Elliott declined to comment.“Right now, serious heat is being applied on Son,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Son has to be seen actually doing something.”Son’s heading into the meeting with one win under his belt: T-Mobile US Inc. and Sprint have agreed to new terms for their pending merger, a key step toward completing a transaction that will unload the loss-making carrier and unlock new capital for SoftBank. Its shares rose as much as 3.3% in Tokyo Friday.T-Mobile, Sprint Renew Deal as Merger Clears Regulatory HurdlesAlthough next month’s event was scheduled before Elliott disclosed its stake and is not designed to specifically address the activist investor’s involvement, it will be a focus for attendees, said people familiar with the preparations. Executives are bracing for questions about Elliott’s intentions and how far the shareholder will go to boost the stock’s value.Goldman Sachs Group Inc. is organizing the March event, the people said. The firm, which helped Japan’s Sony Corp. and Toshiba Corp. in their dealings with activist investors, is vying for the job of advising SoftBank on Elliott, said a different person said. However, SoftBank is likely to manage the relationship in-house, another person said. The job may fall to Marcelo Claure, the chief operating officer who’s helping oversee the WeWork debacle; Katsunori Sago, the chief strategy officer and a former Goldman Sachs executive; or Ron Fisher, a director and trusted adviser to Son. A Goldman representative declined to comment on SoftBank.Dogs and PizzaSoftBank is recovering from a series of stumbles in recent months. WeWork’s plan to go public last year imploded, forcing SoftBank to arrange a rescue financing of $9.5 billion in October. Uber, despite a two-month surge, is still trading about 10% below last year’s offering price. The Vision Fund has suffered other high-profile setbacks, including investments in failed online retailer Brandless Inc., dog-walking app Wag Labs Inc. and pizza robot company Zume Pizza Inc.Elliott has said it took the stake in SoftBank because the Japanese company’s shares are woefully undervalued compared with its assets. Son himself has been pleading the case with increasing frequency. SoftBank’s own sum-of-parts calculation puts its total value at 12,300 yen a share ($111). That’s more than double SoftBank’s actual share price, which values the company at about $104 billion. Elliott has pegged SoftBank’s net asset value at about $230 billion, people familiar with the discussions have said.The disconnect between what SoftBank and Elliott say the company is worth and the market value can be explained by several quirks of how the business is run, according to a report from Pierre Ferragu, an analyst at New Street Research. Many shareholders would like the company to return more capital and improve its governance, he wrote. Risks associated with the Vision Fund and a lack of details about tax liabilities associated with cashing out its investments are other factors.SoftBank recognized the need for more oversight as early as 2018, when it charged Claure with a broad review of operations across SoftBank companies. Claure, the former head of Sprint, spent months assembling a team of about 40 executives. In the end, he was forced to cede control of the so-called SoftBank Operating Group to the man it was supposed to be overseeing: Rajeev Misra, the head of the Vision Fund.Elliott wants SoftBank to set up a special committee to review investment processes at the Vision Fund. Elliott argues the fund has dragged down the share price despite making up a small portion of assets under management, said people familiar with the discussions.Some at SoftBank are resistant to the idea of an oversight committee. Instead, SoftBank is seeking to resolve issues at the Vision Fund with new governance standards for the companies it invests in. The new rules will encompass how the fund approaches the composition of the board of directors, founder and management rights, rights of shareholders, and mitigation of potential conflicts of interest.Son has conceded that missteps with the original fund is making it difficult to raise money for a successor. He said last week that SoftBank may need to invest in startups using solely its own capital for a year or two.‘Black Swan’Elliott is also calling for a buyback of as much as $20 billion. A repurchase of that scale could boost SoftBank’s shares by 40%, Ferragu estimated. SoftBank’s last share repurchase was announced about a year ago, a record 600 billion yen. It sparked a rally that pushed the stock to its highest price in about two decades.Selling Alibaba shares to pay for a buyback, as Elliott has proposed, could be a point of contention with Son. In the past, Son has used the shares as collateral to borrow money for big acquisitions, including the $32 billion purchase of chip designer ARM Holdings. Son said last week during a quarterly financial briefing that he’d prefer to sell as little as possible and that there’s “no rush” to do so.SoftBank said on Wednesday it plans to borrow as much as $4.5 billion against shares of its Japanese telecom unit. The company, which had 3.8 trillion yen of cash and equivalents at the end of December, said it was raising capital for operations. SoftBank’s debt load exceeds $120 billion.Son’s reliance on debt is raising alarms, said Tang, the financial analyst. “He’s going to get wiped out if there is some black swan event,” Tang said. “SoftBank needs to de-leverage, and the best way to do it is to sell the Alibaba stake.”Elliott has a tradition of using strong-arm tactics to get its way with target companies, but there’s little chance of that happening with SoftBank. Elliott’s stake enables it to call an emergency shareholder meeting, but pushing through a proposal without the founder’s backing is a long shot. Son, who often goes by the nickname Masa, controls more than a quarter of SoftBank stock through various vehicles, and the company bylaws require two-thirds of votes to pass any proposal made through the board, according to a person with knowledge of the rules.“Unless everyone is against him,” said Tang, “it’s not possible to dislodge Masa.”(Updates with share action in the seventh paragraph)\--With assistance from Scott Deveau.To contact the reporters on this story: Pavel Alpeyev in Tokyo at email@example.com;Giles Turner in London at firstname.lastname@example.org;Takahiko Hyuga in Tokyo at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Mark Milian, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Under the revised deal, SoftBank <9984.T> will hold about 24% of the combined entity, down from 27% under the earlier terms. T-Mobile's parent Deutsche Telekom <DTEGn.DE> will hold about 43% of the combined entity, up from the 42% that the German group would have held.
“Surprising judicial activities” like the approval of a merger between Sprint and T-Mobile have disrupted the U.S. business environment, says AT&T President and COO John Stankey.