SoftBank Group Corp.’s Japanese mobile subsidiary suffered a bitter debut on the Tokyo Stock Exchange on Wednesday, slumping 15 percent, hurt by a recent service outage and concerns about the use of parts from Chinese telecom Huawei.
Shares fetched an opening price of ¥1,463 and slid further to end their first day at ¥1,282, down 15 percent from the initial public offering price of ¥1,500 announced earlier this month.
Company President Ken Miyauchi and four other executives each rang a bell with a wooden hammer at a festive ceremony celebrating the IPO, which sought to raise more than ¥2 trillion.
Miyauchi acknowledged it was “unfortunate that the share price ended down.”
“But this is only the beginning. Many things will happen. We are off to a tough start of our journey … but I see this as a new start for our business,” he told reporters after the stock market closed for the day.
SoftBank was listing more than 1.7 billion shares, or about one third held by its parent company. Based on the opening price, the company raised ¥2.6 trillion ($23 billion), the record amount for an IPO on the Tokyo bourse.
The IPO compares with some of the world’s biggest. China’s Alibaba Group raised about $20 billion when it went public in 2014, and Facebook raised $16 billion in 2012.
Many Japanese retail investors see IPOs as a way to secure profit because shares usually open higher. SoftBank is also attracting investors with its promised 85 percent dividend payout, much higher than the average of 30 percent among listed companies.
The listing came about two weeks after a service outage attributed to a software problem affected a large number of customers. They were unable to send text messages or make payments via mobile phones during the outage, which was resolved after several hours.
The company also recently acknowledged using equipment made by Huawei, which faces restrictions or bans in other countries because of security concerns. Japan’s cybersecurity committee recently adopted a guideline effectively banning Huawei products in future purchases of government equipment.
SoftBank Group’s chief, Masayoshi Son, has also drawn investor concerns for his relations with Saudi Arabian Crown Prince Mohammed bin Salman after the killing of Saudi journalist Jamal Khashoggi. Last month, Son condemned the killing but said he would continue to do business with Saudi Arabia.
About half of SoftBank Group’s $100 billion Vision Fund investment money comes from the kingdom. The fund has been investing in solar projects and artificial intelligence.
The parent SoftBank wants to add cash for its investments not linked to Saudi Arabia.
It has invested in a range of companies globally, such as U.S. wireless company Sprint, British “internet of things company” ARM and Chinese e-commerce giant Alibaba.
SoftBank, which created the Pepper companion robot, was founded in 1986 as a software, broadband and fixed-line telecommunications company. It was the first mobile carrier to offer the Apple iPhone in Japan.
One market player from a securities company, who declined to be named, added that the timing of the IPO was tricky.
“This also came at a time when worries over a global slowdown are intensifying. The Nikkei 225 has fallen since the listing was announced (earlier this year).”
“And the business environment for mobile phones is expected to toughen ahead with a new entry in the sector and government calls for a deep cut in fees,” he said.
“The SoftBank Group has already been listed, which made the listing of the mobile unit less fresh,” added the analyst.
Analysts at S&P Ratings have said the IPO “would further underline SoftBank’s transition to an investment holding company.”
Another ratings agency, Moody’s, said the IPO would “enhance transparency” in the parent company’s investment portfolio because the mobile unit’s “share price and daily market value will be available to the public.”
The SoftBank parent company itself has said the listing would give the mobile unit “greater managerial autonomy to develop its own growth strategy.”
It has also said the listing would also help clarify the roles of the parent company and its mobile unit.
The mobile unit said in a statement alongside the market debut that it expects net profit of ¥420 billion on sales of ¥3.7 trillion for the full year to March 2019.
In the year that ended March, it logged net profit of ¥400.75 billion on sales of ¥3.58 trillion, it said.
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