SoftBank Group Corp.’s Japanese telecom unit SoftBank Corp. is set to raise about ¥120 billion ($808 million) in what would be the country’s first public offering of bond-type class shares.
A regulatory filing showed on Monday that the new equities will be listed on the Tokyo Stock Exchange (TSE). They are expected to capture retail investors’ interests due to the company’s name value and a 2%-4% dividend rate for the first five years.
The annual dividend rate will fluctuate once the five years end, and SoftBank will be able to buy them back at an amount equivalent to the issue price.
The issuance of the class shares would not impact existing shareholders as they offer no voting rights and are not convertible to common stock. Prospective buyers may also use the Nippon Individual Savings Account (NISA) program to benefit from tax exemption.
Masayoshi Son’s SoftBank filed for a shelf offering in May, intending to list the bond-like equities before the end of this year’s financial year, which is the 31st of March 2024.
The company plans to use the proceeds from the sale for growth investments in telecommunications, IT technologies, and next-gen social infrastructure.
Shares of SoftBank’s telecom arm were trading 0.6% higher in Tokyo on Monday, while the tech investor itself rose 3.6%.
Attracting Investors with Japan’s First Bond-Type Shares
The Bank of Japan (BOJ) continued to hold on to its ultra-loose monetary policy, keeping the short-term interest rates at -0.1% despite other central banks’ rate hikes. Last week, the BOJ weakened expectations for any rate increases in the near term.
The move further strengthened the need for higher-yielding investments, particularly as the country’s ¥1.11 trillion household savings pool appeared to be leaning towards foreign investments with higher returns, pulling the yen deeper in the red.
Chief strategist Hiroshi Namioka said SoftBank may be able to draw in individuals because of its strong name as well as the class shares’ reasonably high yields and NISA eligibility. Namioka added that the product would need a decent description as the retail buyers are still learning about its characteristics.
SoftBank is believed to be targeting individuals and a few institutional investors for the offering.
