In Japan SoftBank Corp will raise $800 million from shares that resemble bonds

In Japan’s first-ever IPO of a class of shares that resemble bonds, SoftBank Corp (9434.T) wants to raise 120 billion yen ($809 million), the company disclosed in a regulatory filing on Monday.

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The lack of voting rights and the inability to be converted into common shares later prevent the claims from diluting the interests of common shareholders.

According to bankers involved in issuance, they are primarily geared at individual investors and are anticipated to offer greater yields than corporate bonds at a lower risk than equities.

The issuance was first planned in May by SoftBank Corp, the Japanese division of tech investment behemoth SoftBank Group (9984.T), but board approval came on Monday.

The shares will be priced between October 13 and October 17 and listed on the Tokyo Stock Exchange on November 2.

The shares offer a fixed dividend and can be redeemed by SoftBank after five years while classified as equity in accounting terms.

This reduces the principal risk for investors while having a minimal impact on SoftBank’s return on equity and earnings per share.

Between its stock dividend yield of about 5% and its corporate bonds, the highest paying of which has a coupon rate of 1.3%, SoftBank stated the yearly dividend would be between 2.5% and 3%.

In Japan, individual investors are often cautious and looking for higher returns despite rising interest rates, but without the volatility and primary risk associated with direct shareholdings, according to bankers engaged in the offering.

Unlike corporate bonds, which cannot be purchased through the tax-efficient Nippon Individual Savings Account (NISA), shares that will be publicly listed can.

As half of the family’s financial assets are in cash or bank deposits, the issuance fits with Japanese government policy, which has long tried to stimulate household savings for investment.

According to SoftBank, the funds would be invested in telecommunications, IT, and “next-generation social infrastructure” for growth.

The bankers stated that other companies may issue similar shares depending on demand. Still, doing so required revising a company’s articles of incorporation, so it might take some time before a market for the shares emerges.

(This item has been updated to reflect that the listing date in paragraph 5 should be November 2, not November 1.)

($1 = 148.3700 yen)

Reporting was done in Bengaluru by Urvi Dugar and in Tokyo by Anton Bridge, Mariko Katsumura, and Kim Coghill.


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