December 10, 2018 / 6:16 AM / 3 months ago

SoftBank's record IPO reaches $23.5 billion after extra share sale

TOKYO (Reuters) - SoftBank Group Corp (9984.T) is set to raise 2.65 trillion yen ($23.5 billion) in Japan’s biggest-ever IPO - a share sale widely regarded as finalizing the group’s transition from domestic telco to a monolithic global tech investor.

FILE PHOTO - A pedestrian holding a mobile phone walks past a logo of SoftBank Corp in front of its branch in Tokyo December 31, 2013. REUTERS/Yuya Shino/File Photo

Telco unit SoftBank Corp (9434.T) on Monday priced its stock at 1,500 yen apiece, as previously indicated.

It also said it will sell all extra shares set aside for excess demand, taking the total just shy of the record $25 billion raised in 2014 by Chinese e-commerce giant Alibaba Group Holding Ltd (BABA.N), a SoftBank Group portfolio company.

The group, which controls the world’s biggest tech private equity fund at nearly $100 billion, will use the proceeds to invest in startups which have ranged from tiny games makers to U.S. ride-hailing giant Uber Technologies Inc [UBER.UL].

“Demand was well above the number of shares on offer,” SoftBank Corp said, declining to disclose by how much.

The stock will debut on the Tokyo Stock Exchange’s first section on Dec. 19.

TROUBLED BACKDROP

The IPO pricing comes just days after Japan’s third-largest mobile phone network provider by subscriber numbers suffered a rare nationwide service outage. SoftBank said the disruption would not affect its earnings or dividend forecast.

But other causes of concern abound. The government wants to see a decline in mobile phone charges just as competition is set to increase with the market entrance next year of e-commerce firm Rakuten Inc (4755.T).

Moreover, Tokyo plans to ban government purchases of telecommunications equipment from Chinese maker Huawei Technologies Co Ltd [HWT.UL], sources have told Reuters. SoftBank has a long relationship with Huawei that has included joint trials of fifth-generation (5G) network technology.

On Monday, Kyodo News reported that SoftBank will no longer use Huawei equipment for its current network as well as in 5G. The firm told Reuters it was closely watching government policy.

Earlier in the IPO process, SoftBank Group’s ties to Saudi Arabia - whose contribution makes up almost half of its massive Vision fund - caused investors to sweat after Saudi security forces were implicated in the murder of a dissident journalist.

RETAIL INVESTORS

SoftBank offered nearly 2 billion shares for sale raising concern of oversupply, particularly as it is widely perceived to be a mature business with consequently limited growth prospects.

It allocated over 80 percent of the sale for domestic retail investors, banking sources have said. To stimulate interest, the deal’s domestic lead underwriters pursued an unprecedented marketing campaign - including what are believed to be Japan’s first TV adverts for a private firm’s IPO.

“Retail investors see IPO stocks as profitable,” said Naoto Akashi, general manager at SBI Securities, Japan’s biggest online brokerage and one of the lead underwriters for the domestic portion of SoftBank’s IPO.

“In popular IPOs, there are several cases this year in which we received orders worth over 1 trillion yen for a single deal during book-building period,” he said, declining to comment specifically on SoftBank.

Kazuto Hayashi, chief executive of smartphone brokerage startup One Tap BUY, said the IPO also attracted many young investors, some participating in an IPO for the first time.

Still, brokerages said they would be able to attract enough investors with SoftBank’s dividend alone. SoftBank likely set its indicative share price at 1,500 yen - rather than a price range, as is the norm - to keep its dividend yield among the highest in Japan at 5 percent, brokerages said.

(Click for an interactive graphic showing the dividend payout of Japan's three biggest telcos: tmsnrt.rs/2SwyWIo)

Reporting by Taiga Uranaka; Additional reporting by Chris Gallagher, Chang-Ran Kim and Sam Nussey; Editing by Christopher Cushing

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