Goldman wins in SoftBank’s $2.9bn trade-from-home sale

Linda J. Dodson

TOKYO — On May 21, Makoto Ito, head of the capital markets division at Goldman Sachs Japan, logged into Zoom on his computer at his Tokyo home.

Using a high-security account for Goldman employees, he began sending directions to a team of about a dozen people to begin a 310 billion yen ($2.87 billion) sale of shares in wireless carrier SoftBank Corp.

The deal, part of a plan by SoftBank Group to sell 4.5 trillion yen in assets, became Japan’s largest-ever wholly remote stock transaction, with all participants — SoftBank executives, bankers and investors — operating at home from the outset. The transaction was also a first for Goldman, whose use of technology and broad global investor base were key to its success.

SoftBank Group has already made plans to unload or monetize 1.5 trillion yen in assets less than two months after announcing the sale in March, and preparations are underway for another 2.5 trillion yen. For brokerages in Japan, much depends on whether they can get a piece of these potentially lucrative deals.

The Goldman group worked until the day of the SoftBank deal to set up a framework to coordinate with the 60-member sales team, using a wide range of communication methods including internal messaging systems and phone calls. The investment banking division kept in contact via Zoom to provide updates.

The sale was conducted via block trades — high-volume transactions in which institutions receive shares from a stockholder and sell them on to investors, usually off the open market. The SoftBank deal was Japan’s largest-ever block trade transaction, more than double the previous record set in 2005 by a Mitsubishi Motors share sale.

While this method minimizes the impact on prices, it also exposes intermediaries to the risk of losses if market conditions change before the final sale or if buyers cannot be found for the entire share inventory.

The SoftBank shares were all moved on foreign markets in a matter of hours, after trading closed on the Tokyo Stock Exchange and before it reopened the next trading day. Goldman Sachs took on the largest number of shares, with Credit Suisse participating as well.

A flurry of messages to potential overseas buyers went out around 4 p.m. Japan time on May 21, or early morning in the U.S. Talks went on until the order deadline of 11 p.m. was reached with more than 1 trillion yen in demand.

“That was the moment when we breathed a sigh of relief,” Goldman’s Ito said.

Goldman apparently solicited orders at a 4% discount to SoftBank Corp.’s May 21 close of 1,375 yen. The sale drew offers from nearly 150 potential buyers, including long-term investors such as sovereign wealth funds, U.S. pension funds and large asset- management companies.

SoftBank Corp.’s 2.3 trillion yen initial public offering in 2018 was led by Japanese institutions such as Nomura Securities, with domestic retail investors being the largest buyers.

By contrast, this deal targeted institutional investors around the world. Goldman’s strong international sales team, in regular contact with an extensive global network of investors, proved essential.

As foreign brokerages take the lead, Japanese competitors have fallen by the wayside, and not only due to their relative lack of overseas connections. Big Japanese trading houses have focused their marketing efforts on retail investors, but their biggest asset, face-to-face interaction, has been neutralized by social distancing amid the coronavirus.

Online brokerages have gained ground in recent years, but Japanese investors lack systems that can place large-scale remote orders from home.

The SoftBank deal “made us feel the difference between overseas and domestic brokerages, including their use of digital technology,” said an executive at a major Japanese securities company.

Source Article

Next Post

Coronavirus latest: New York offers free universal testing

The Nikkei Asian Review is tracking the spread of the new coronavirus that originated in the central Chinese city of Wuhan. Global cases have reached 6,395,328, according to Johns Hopkins University. The worldwide death toll has hit 380,580. To see how the disease has spread, view our virus tracker charts: […]