Hedge fund Elliott Management has shed almost its entire position in Japan’s SoftBank, in the latest sign of growing investor unease over the fortunes of the world’s biggest technology investment group.
The US-based activist investor has decided to effectively end its multi-year bet on SoftBank by selling the vast majority of its remaining shares, having previously bought up to $2.5 billion in the group, according to the people known to the trade.
One of the people said Elliott made its move after losing faith in the Japanese group’s billionaire founder Masayoshi Son and his ability to close the huge gap between the value of SoftBank’s various holdings and its capitalization of market
The exact size and timing of the sale of Elliott, which manages about $56 billion in assets, was not immediately available. But the person added that it took place earlier this year as tech stocks, including SoftBank, were headed for a strong selloff.
Elliott declined to comment.
In February 2020, it was first revealed that Elliott had built a $2.5 billion stake in SoftBank. Last year, the hedge fund sold a significant portion of those shares at a profit, according to people with knowledge of the matter.
The decision to ditch the position almost entirely is another blow for SoftBank, which has responded to mounting pressure on its business by promising a major cost cut and a historic sale of the company’s stake in the Chinese e-commerce giant Alibaba.
SoftBank posted a record quarterly loss of $23 billion last week, and Son said he was “embarrassed” by past euphoria over the group’s performance. Shares of SoftBank are down 10% over the past year and 45% below their all-time high reached in March 2021.
According to SoftBank’s websitethe group should be worth roughly double the ¥5,900 per share it currently stands at if investors were valuing the company on the basis of its net asset value.
Elliott’s investment had been based on the belief that SoftBank could close that gap through share buybacks, improved governance and asset sales.
Before he sold his stake, the Financial Times reported in November that Elliott and other investors had become frustrated that SoftBank had not embarked on a new round of share buybacks. Instead, Son had chosen to continue investing billions of dollars in early-stage start-ups through his investment arm.
At the time, Elliott was pressing Son to find ways to boost its share price through buybacks and improve corporate governance. Its investment was led by Gordon Singer, the head of the firm’s London office and son of its founder Paul Singer.
Soon after, SoftBank’s share price crashed at the height of pandemic concerns in March 2020. The FT reported that Elliott discussed privatizing SoftBank during emergency talks over the weekend, but the Japanese group eventually embarked on a $41 billion plan to dispose of assets. and launch a $23 billion share buyback program.
Elliott increased his investment around the time SoftBank’s stock exploded. Shares of SoftBank rose from a low of ¥2,687 in March 2020 to an all-time high of ¥10,635 in March 2021.
In addition to Singer, the position at SoftBank was led by Nabeel Bhanji, a senior portfolio manager in the firm’s London office. Bhanji has focused on Toshiba, another Japanese conglomerate in the past year, where Elliott has built a larger stake. Bhanji joined the board from Toshiba in June.