Japan’s biggest initial public offering made a dismal trading debut with shares in SoftBank’s mobile phone business sliding 15 per cent, wiping $9bn off the company’s IPO price market capitalisation.
At a news conference on Wednesday to mark the first day of trading after its $23.5bn listing, Ken Miyauchi, chief executive of SoftBank’s mobile unit, began by apologising for a recent mobile network outage at what might otherwise have been a celebration of one of the largest share sales in global market history.
Brokers and institutional investors said the share issue, which was aimed at retail investors and persuaded many ordinary Japanese to open trading accounts for the first time, could cast a shadow over the IPO market, where 10 companies were still to make their debut in December alone.
“This is our starting point and we will work to increase our corporate value,” Mr Miyauchi said when asked about the poor trading debut.
The opening day decline for the blockbuster IPO came amid wider questions about the business strategies of Masayoshi Son, the founder of SoftBank who now plans to focus the parent company on technology investment at what some investors believe is an increasingly shaky stage of the cycle.
The massive issue, which initially priced SoftBank’s mobile unit — listed as SoftBank Corp — at ¥1,500 per share, faced what traders said were strong headwinds. Those included a rare but embarrassing service collapse earlier this month that left millions of SoftBank’s Japanese mobile customers without a network for several hours, tainting the brand at a critical moment.
The global row surrounding Huawei Technologies has also had an effect, shining a spotlight on Mr Son’s long relationship with the Chinese equipment supplier and raising questions with some investors over the potential cost of replacing existing Huawei equipment in SoftBank’s 4G network base stations.
A bearish market environment, as the Topix index heads for its first annual decline since 2011, was no help.
“The market is concluding that the ¥1,500 IPO price was too high, considering questions about longer-term growth prospects of the mobile business,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. “If investors want to invest in SoftBank’s growth potential, they’ll just buy SoftBank group shares.”
Japan’s third-biggest mobile carrier said it expects net profit for the fiscal year through March 2019 to increase 4.8 per cent from a year earlier to ¥420bn.
After opening at ¥1,463 on Wednesday, the stock sank 15 per cent to ¥1,282, taking the mobile unit’s market value to ¥6.1tn ($54bn). Shares in parent SoftBank group fell 0.9 per cent.
Even after that tumble, institutional investors said the stock was too expensive. One investment manager said his fund was unlikely to be a buyer of SoftBank Corp at a price much above ¥1,000 per share, and that the shares were likely to attract short-sellers as more become available to borrow over coming weeks.
Traders said the sell-off was driven by domestic retail investors, the group that bought some 80 per cent of the new shares, attracted by the 5 per cent dividend yield. Brokers also convinced them that in the medium term the shares would be supported by huge volumes of passive investment money as the stock was added to the various benchmark indices tracked by those funds.
Makoto Kikuchi, chief executive of Myojo Asset Management, said the dismal performance could damp Japan’s longer-term efforts to lure people to shift their savings into equities and other investments.
“For those who tried equity trading for the first time, this IPO just reinforces the image that stocks are bad, thus driving away investors who had the potential to actively participate in markets in the future,” Mr Kikuchi said.
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