SoftBank may split in two to focus on tech bets

Posted January 14, 2018 9:39 p.m. EST

— Masayoshi Son made a name for himself with blockbuster bets on companies like Alibaba and Uber. But the next big move by the billionaire founder of SoftBank could be much closer to home.

SoftBank -- a Japanese telecom company that has drawn attention for its aggressive investments in tech businesses around the world -- said Monday that it's considering an IPO of its mobile business in Japan.

Selling shares could raise billions of dollars for Son to hunt down more global tech deals -- and should also keep investors happy.

The SoftBank announcement followed a report by the Nikkei Asian Review that the company is planning to raise as much as $18 billion this year by floating 30% of the mobile unit in Tokyo and possibly London. That values the mobile business at roughly $60 billion.

Chris Lane, an analyst at investment firm Sanford Bernstein, said an IPO would set SoftBank up for a new round of bold investments.

In recent years, the Japanese company has become better known for building big stakes in technology companies around the world rather than for its traditional business of providing telecommunications services in Japan.

Some of Son's big bets have paid off, such as the early investment in Alibaba. But others -- like the tens of billions it spent on U.S. wireless carrier Sprint and U.K. chip designer ARM -- have come at a cost.

SoftBank's debt has ballooned to about 15 trillion yen ($135 billion), which could make it tough to persuade banks to lend it money for big new investments.

Lane predicts SoftBank would use billions raised from an IPO of its mobile business to seed its next Vision Fund.

The first Vision Fund, backed by Saudi Arabia, raised close to $100 billion. It has invested in tech start-ups like Slack and FlipKart.

An IPO could bring other benefits.

Some investors are concerned that SoftBank's shares trade too cheaply. Its current market cap is about 10 trillion yen ($90 billion). That's less than the value of its big stake in Alibaba, which research firm Pelham Smithers Associates estimates is worth a gigantic 14.7 trillion yen ($133 billion).

The reason for this gulf in valuation is that growth at SoftBank's mobile business -- which still contributes a huge part of the company's annual revenues -- has tailed off, giving investors few reasons to get excited about it.

Spinning it off will allow investors to pick and choose between SoftBank, the globe-trotting high-tech investor, and SoftBank, the slow and steady Japanese telco, according to Pelham Smithers.

That "should send SoftBank shares substantially higher," the firm wrote in a note to clients Monday.

Investors appear to agree. SoftBank shares jumped more than 3% Monday .