SoftBank Group has set the stage for what is likely to be one of the largest initial public offerings ever, with its move to float mobile phone unit SoftBank Corp. But as Chairman and CEO Masayoshi Son completes the conglomerate's divergence into an investing holding company and a wireless provider, market watchers see significant risks on both fronts.
The IPO, approved by the Tokyo Stock Exchange on Monday and scheduled for Dec. 19, is expected to raise up to 2.64 trillion yen ($23 billion). SoftBank Group will sell as much as 36.8% of its holdings in its mobile arm, including an overallotment of shares if demand is strong.
Underwriters have set an estimated share price of 1,500 yen based on comparisons with peers and other factors, but the actual price may differ depending on investor demand ahead of the planned listing.
Japan's largest IPO to date was NTT Mobile Communications Network, now known as NTT Docomo, which raised 2.12 trillion yen in 1998, according to Dealogic. Alibaba Group Holding's $25 billion IPO in 2014 stands as the world's largest.
A 1,500 yen IPO price would give SoftBank Corp. a market capitalization of roughly 7.17 trillion yen. This would put it among Japan's 10 most valuable listed companies and ahead of rival KDDI, but behind Docomo.
SoftBank is expected to use the proceeds to contribute to investments by its Vision Fund and help repay interest-bearing debt.
Son has been focusing on transforming the group into an investment holding company targeting technology companies around the world. The centerpiece is the $100 billion SoftBank Vision Fund, announced in 2016 with major support from a Saudi Arabian sovereign wealth fund.
The Vision Fund -- which had agreed to investments in 38 companies as of September, including U.S. chipmaker Nvidia, workplace messaging app Slack and Indian budget hotel startup Oyo -- has been one of the group's best-performing operations since its launch. It accounted for around half of SoftBank's six-month operating profit of 1.42 trillion yen this year.
But there is a darker side to the story. SoftBank Group's interest-bearing debt reached nearly 18 trillion yen as of the end of September. For the fiscal year ended in March, it shelled out 510 billion yen on interest alone. Credit-rating agencies have assigned the company speculative grades.
