2023-12-27 06:47:37
Published on Dec 27 2023 at 7:47
This seems to defy all the rules of economics, and yet. Without spending a single cent, SoftBank Group will double its stake in T-Mobile US. This, thanks to the acquisition of nearly 48.8 million newly issued shares by the American telecoms operator, a jackpot with a market value of nearly $7.6 billion.
This manna did not fall from heaven during these Christmas days. This is actually the logical consequence of the activation of a conditional clause in a 2020 agreement on the merger between T-Mobile US and Sprint, which was a subsidiary of SoftBank.
Bet won
In February 2020, T-Mobile US (subsidiary of Deutsche Telekom) and its competitor Sprint had indeed modified the terms of their merger which was about to be finalized. The Japanese conglomerate had agreed to contribute 11 Sprint shares for each T-Mobile US share, against a previous ratio more favorable for it. After the merger was finalized on April 1, 2020, SoftBank automatically handed over to the new group its 48.8 million T-Mobile US shares acquired in this way.
But this agreement was accompanied by a very special clause. If the average price of T-Mobile US stock on the Nasdaq index became equal to or greater than $150 over a period of 45 consecutive business days between April 2022 and the end of 2025, then SoftBank Group was to receive without compensation 48, 8 million newly issued T-Mobile shares.
This condition was fulfilled a few days before Christmas. In 2020, it was one of those bold bets that SoftBank Group is accustomed to and which have often played bad tricks on it in recent years, such as its ruinous investments in the American shared office giant WeWork, now in bankruptcy. On the day the merger with Sprint was finalized, T-Mobile US stock closed around $85.
Room for maneuver
SoftBank Group’s share in T-Mobile US will thus double to 7.64%, and the Japanese group should pocket a large gain on investment linked to this operation in its third quarter 2023-2024 (October December), of the order of $1.9 billion.
Just like Arm, a subsidiary of SoftBank recently reintroduced on the stock market, this thick pile of T-Mobile US shares could help the Japanese group borrow more easily to revive its former policy of flamboyant investments, according to analysts. SoftBank Group shares were celebrating this Wednesday on the Tokyo Stock Exchange, appreciating 4.9% around 4:20 GMT, significantly outperforming the Nikkei index (+1.2%).
With AFP
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