Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<p><a href="https://www.smartkarma.com/entities/sre-holdings-corp" target="_blank" data-smartkarma-citation="entities:29672:1" rel="noopener">SRE Holdings Corp (2980 JP)</a> announced (<a href="https://ssl4.eir-parts.net/doc/2980/tdnet/1884363/00.pdf" target="_blank" rel="noopener">J-only</a>) today after market close, they have applied to move from the Mothers Section to the First Section of the Tokyo Stock Exchange. </p><p>This company was formerly known as Sony Real Estate Corporation and was a consolidated subsidiary of <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>. The stock has been listed since December 2019 in the Mothers Section and at present, <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> and <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a> hold <a href="https://www2.tse.or.jp/disc/29800/140120200731471730.pdf" target="_blank" rel="noopener">42.8% and 24.3%</a> respectively.</p><p>If the company qualifies for a TSE1 move that will trigger an Inclusion into the TOPIX Index. </p><p>In this insight, we take a look at the indicative timeline of events and the trading opportunities between now and the potential Inclusion date. </p>

SRE Holdings Corp (2980 JP) announced (J-only) today after market close, they have applied to move from the Mothers Section to the First Section of the Tokyo Stock Exchange. This company was formerly known as Sony Real Estate Corporation and was a consolidated subsidiary of Sony Corp (6758 JP). The stock has been listed since December 2019 in the Mothers Section and at present, Sony Corp (6758 JP) and Z Holdings (4689 JP) hold 42.8% and 24.3% respectively.If the company qualifies for a TSE1 move that will trigger an Inclusion into the TOPIX Index. In this insight, we take a look at the indicative timeline of events and the trading opportunities between now and the potential Inclusion date. 

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><p>Our 'best' and 'worst' pairing from Wednesday's announcements is E-commerce office supplies company <a href="https://www.smartkarma.com/entities/askul-corp" target="_blank" data-smartkarma-citation="entities:16807:1" rel="noopener">Askul (2678 JP)</a> and <a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway (9020 JP)</a>.  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/492/original/2020-09-17_06-14-59.png?1600290917" class="editor-image img-responsive" data-smartkarma-image-id="159492"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/493/original/2020-09-17_06-15-48.png?1600290962" class="editor-image img-responsive" data-smartkarma-image-id="159493"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><p><strong>DAILY STATS</strong> - Only one company, <a href="https://www.smartkarma.com/entities/crossfor-co-ltd" target="_blank" data-smartkarma-citation="entities:29158:1" rel="noopener">Crossfor (7810 JP)</a> had a negative Results Score, while only four of fourteen Forecast/Revision Scores were positive. The average change in Forecast/Revision Score was -8.9 points.</p>

• BEST &amp; WORST •Our 'best' and 'worst' pairing from Wednesday's announcements is E-commerce office supplies company Askul (2678 JP) and East Japan Railway (9020 JP).  Source for all charts &amp; tables: Japan AnalyticsDAILY STATS - Only one company, Crossfor (7810 JP) had a negative Results Score, while only four of fourteen Forecast/Revision Scores were positive. The average change in Forecast/Revision Score was -8.9 points.

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​16 - Askul Begs a Question & East Japan [De]Rail[ed]way

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<p>The life of <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE Corp (3938 JP)</a> as a listed entity with a listed future is now entering its Zombie Twilight. The Tender Offer by <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> and <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> to buy out minorities has ended and we now move on to the next stage. </p><p>Today the results of the Tender Offer for LINE were <a href="https://d.line-scdn.net/stf/linecorp/en/ir/all/LINE_20200916_EN_3.pdf" target="_blank" rel="noopener">announced</a> and the Offerors managed to acquire a sum total of 31,234,670 shares leaving about 25,000,000 shares left over un-tendered (plus options and converts un-converted). That is 25,000,000 million shares worth of zombie shareholders who will roam the markets until the shares' final retirement after the EGM. </p><p>That is $1.25bn+ worth of zombies at the Tender Offer Price. </p><p>The now-zombies defended their boundary, keeping the shares above the ¥5380 Tender Offer Price line from late June until the day before the Tender Offer went ex-.</p><p> </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/330/original/Screenshot%202020-09-16%20at%204.03.18%20PM.png?1600243413" class="editor-image img-responsive" data-smartkarma-image-id="159330"></figure><p></p><p>The period between now and the delisting of LINE could be 4-5 months. It could take 5-6 months to get one's money, unless one is going after appraisal rights. Then it will take a little longer, unless it takes a lot longer. </p><p>This situation is different from the post-Tender trading situation of <a href="https://www.smartkarma.com/entities/familymart-co-ltd" target="_blank" data-smartkarma-citation="entities:320:1" rel="noopener">FamilyMart Co Ltd (8028 JP)</a> and one should not expect the squeeze which happened there. </p><div>
<hr>
<p>Previous insights related to this situation and the names involved are listed below.</p>
</div><div><table class="table table-striped"><tbody>
<tr><td colspan="3" style="width: 724px;"><h2>Relevant Insights</h2></td></tr>
<tr>
<td style="width: 122px;"><strong>Date</strong></td>
<td style="width: 97px;"><strong>Author</strong></td>
<td style="width: 463px;"><strong>Title</strong></td>
</tr>
<tr><td colspan="3" style="width: 724px;"><h3>About Cashless Payments</h3></td></tr>
<tr>
<td style="width: 122px;">13 Mar 2019</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/loyalty-points-in-japan-more-loyalty-more-points-and-the-conduit-to-cashless-payments" target="_blank" data-smartkarma-citation="insights:28547" rel="noopener">Loyalty Points In Japan: More Loyalty, More Points and the Conduit to Cashless Payments</a> </td>
</tr>
<tr>
<td style="width: 122px;">2 Apr 2019</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/mio-kato-cfa" target="_blank" data-smartkarma-citation="accounts:713" rel="noopener">Mio Kato, CFA</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/mercari-why-mercari-is-likely-to-be-a-winner-in-the-cashless-wars" target="_blank" data-smartkarma-citation="insights:28946" rel="noopener">Mercari: Why Mercari Is Likely to Be a Winner in the Cashless Wars</a> </td>
</tr>
<tr>
<td style="width: 122px;">28 Jun 2019</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/supun-walpola" target="_blank" data-smartkarma-citation="accounts:1650" rel="noopener">Supun Walpola</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/paying-with-paypay-a-deep-dive-into-yahoo-japan-s-mobile-payment-business" target="_blank" data-smartkarma-citation="insights:30750" rel="noopener">Paying with PayPay: A Deep Dive into Yahoo! Japan’s Mobile Payment Business</a> </td>
</tr>
<tr>
<td style="width: 122px;">6 Jan 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/lawson-and-kddi-join-forces-in-cashless-payments-war" target="_blank" data-smartkarma-citation="insights:35596" rel="noopener">Lawson and KDDI Join Forces in Cashless Payments War</a> </td>
</tr>
<tr>
<td style="width: 122px;">24 Jan 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/mercari-merpay-acquisition-of-origami-pay-continues-cashless-consolidation" target="_blank" data-smartkarma-citation="insights:36051" rel="noopener">Mercari – Merpay Acquisition of Origami Pay Continues Cashless Consolidation</a> </td>
</tr>
<tr>
<td style="width: 122px;">15 Feb 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/japan-payment-wars-ntt-docomo-and-merpay-origami-to-attempt-catch-up-with-paypay-and-rakuten" target="_blank" data-smartkarma-citation="insights:36609" rel="noopener">Japan Payment Wars: NTT Docomo and Merpay/Origami to Attempt Catch up with PayPay and Rakuten</a> </td>
</tr>
<tr>
<td style="width: 122px;">20 Mar 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/some-resistance-to-cashless-payments-in-japan" target="_blank" data-smartkarma-citation="insights:37629" rel="noopener">Some Resistance to Cashless Payments in Japan</a> </td>
</tr>
<tr>
<td style="width: 122px;">28 Apr 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/z-holdings-and-yamato-create-fulfilment-service-for-all-to-rival-rakuten-and-amazon" target="_blank" data-smartkarma-citation="insights:38797" rel="noopener">Z Holdings and Yamato Create Fulfilment Service for All to Rival Rakuten and Amazon</a> </td>
</tr>
<tr>
<td style="width: 122px;">29 Jul 2020</td>
<td style="width: 97px;">
<a href="https://www.smartkarma.com/profiles/supun-walpola" target="_blank" data-smartkarma-citation="accounts:1650" rel="noopener">Supun Walpola</a> </td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/z-holdings-alt-data-paypay-mall-and-paypay-flea-market-continue-to-disappoint" target="_blank" data-smartkarma-citation="insights:41671" rel="noopener">Z Holdings [Alt Data]: PayPay Mall and PayPay Flea Market Continue to Disappoint</a> </td>
</tr>
<tr><td colspan="3" style="width: 724px;"></td></tr>
<tr><td colspan="3" style="width: 724px;"><h3>About This Deal</h3></td></tr>
<tr>
<td style="width: 122px;">14 Nov 2019</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/z-and-line-sitting-in-a-tree-m-e-r-g-i-n-g" target="_blank" data-smartkarma-citation="insights:34463" rel="noopener">Z and LINE, Sitting in a Tree... M.E.R.G.I.N... G...?</a> </td>
</tr>
<tr>
<td style="width: 122px;">18 Nov 2019</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/line-and-z-sitting-in-a-tree-m-e-r-g-i-n-g-and-a-tender-offer" target="_blank" data-smartkarma-citation="insights:34560" rel="noopener">LINE and Z, Sitting in a Tree... M.E.R.G.I.N.G! And a Tender Offer!</a> </td>
</tr>
<tr>
<td style="width: 122px;">26 Dec 2019</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;"><a href="https://www.smartkarma.com/insights/new-deal-for-line-a-lot-like-the-old-deal" target="_blank" rel="noopener">NEW Deal for LINE (A Lot Like the Old Deal)</a></td>
</tr>
<tr>
<td style="width: 122px;">6 July 2020</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/market-is-pricing-a-line-bump-should-it" target="_blank" data-smartkarma-citation="insights:40976" rel="noopener">Market Is Pricing a LINE Bump - Should It?</a> </td>
</tr>
<tr>
<td style="width: 122px;">22 July 2020</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/a-line-bump-the-other-argument-against" target="_blank" data-smartkarma-citation="insights:41419" rel="noopener">A LINE Bump - The Other Argument Against</a> </td>
</tr>
<tr>
<td style="width: 122px;">29 July 2020</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/line-3938-this-is-not-the-kitchen-sink-you-are-looking-for" target="_blank" data-smartkarma-citation="insights:41674" rel="noopener">LINE (3938) - This Is Not the Kitchen Sink You Are Looking For</a> </td>
</tr>
<tr>
<td style="width: 122px;">3 August 2020</td>
<td style="width: 97px;">Travis Lundy</td>
<td style="width: 463px;">
<a href="https://www.smartkarma.com/insights/the-end-of-the-line-3938" target="_blank" data-smartkarma-citation="insights:41828" rel="noopener">The End of the LINE (3938)</a> </td>
</tr>
</tbody></table></div><div><p><em>In addition to the above insights, Michael Causton's <a href="https://www.smartkarma.com/insights/the-zozo-revival-a-new-private-brand-of-many-names-category-expansion-merchants-return" target="_blank" data-smartkarma-citation="insights:41520" rel="noopener">The Zozo Revival: A New Private Brand of Many Names, Category Expansion, Merchants Return</a> is worth a read to know more about Z Holdings going forward and <a href="https://www.smartkarma.com/profiles/mio-kato-cfa" target="_blank" data-smartkarma-citation="accounts:713" rel="noopener">Mio Kato, CFA</a>'s <a href="https://www.smartkarma.com/insights/zozo-nice-results-but-it-s-just-a-covid-bump" target="_blank" data-smartkarma-citation="insights:41718" rel="noopener">Zozo – Nice Results but It’s Just a COVID Bump</a> takes the view that results announced last week were less impressive than the headline numbers.</em></p></div>

The life of LINE Corp (3938 JP) as a listed entity with a listed future is now entering its Zombie Twilight. The Tender Offer by Softbank Corp (9434 JP) and Naver Corp (035420 KS) to buy out minorities has ended and we now move on to the next stage. Today the results of the Tender Offer for LINE were announced and the Offerors managed to acquire a sum total of 31,234,670 shares leaving about 25,000,000 shares left over un-tendered (plus options and converts un-converted). That is 25,000,000 million shares worth of zombie shareholders who will roam the markets until the shares' final retirement after the EGM. That is $1.25bn+ worth of zombies at the Tender Offer Price. The now-zombies defended their boundary, keeping the shares above the ¥5380 Tender Offer Price line from late June until the day before the Tender Offer went ex-. The period between now and the delisting of LINE could be 4-5 months. It could take 5-6 months to get one's money, unless one is going after appraisal rights. Then it will take a little longer, unless it takes a lot longer. This situation is different from the post-Tender trading situation of FamilyMart Co Ltd (8028 JP) and one should not expect the squeeze which happened there. 

Previous insights related to this situation and the names involved are listed below.

Relevant Insights

Date
Author
Title

About Cashless Payments

13 Mar 2019

Michael Causton 

Loyalty Points In Japan: More Loyalty, More Points and the Conduit to Cashless Payments 


2 Apr 2019

Mio Kato, CFA 

Mercari: Why Mercari Is Likely to Be a Winner in the Cashless Wars 


28 Jun 2019

Supun Walpola 

Paying with PayPay: A Deep Dive into Yahoo! Japan’s Mobile Payment Business 


6 Jan 2020

Michael Causton 

Lawson and KDDI Join Forces in Cashless Payments War 


24 Jan 2020

Michael Causton 

Mercari – Merpay Acquisition of Origami Pay Continues Cashless Consolidation 


15 Feb 2020

Michael Causton 

Japan Payment Wars: NTT Docomo and Merpay/Origami to Attempt Catch up with PayPay and Rakuten 


20 Mar 2020

Michael Causton 

Some Resistance to Cashless Payments in Japan 


28 Apr 2020

Michael Causton 

Z Holdings and Yamato Create Fulfilment Service for All to Rival Rakuten and Amazon 


29 Jul 2020

Supun Walpola 

Z Holdings [Alt Data]: PayPay Mall and PayPay Flea Market Continue to Disappoint 


About This Deal

14 Nov 2019
Travis Lundy

Z and LINE, Sitting in a Tree... M.E.R.G.I.N... G...? 


18 Nov 2019
Travis Lundy

LINE and Z, Sitting in a Tree... M.E.R.G.I.N.G! And a Tender Offer! 


26 Dec 2019
Travis Lundy
NEW Deal for LINE (A Lot Like the Old Deal)


6 July 2020
Travis Lundy

Market Is Pricing a LINE Bump - Should It? 


22 July 2020
Travis Lundy

A LINE Bump - The Other Argument Against 


29 July 2020
Travis Lundy

LINE (3938) - This Is Not the Kitchen Sink You Are Looking For 


3 August 2020
Travis Lundy

The End of the LINE (3938) 

In addition to the above insights, Michael Causton's The Zozo Revival: A New Private Brand of Many Names, Category Expansion, Merchants Return is worth a read to know more about Z Holdings going forward and Mio Kato, CFA's Zozo – Nice Results but It’s Just a COVID Bump takes the view that results announced last week were less impressive than the headline numbers.

Equity Capital Markets

<p>On 21 May, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>  <a href="https://group.softbank/en/news/press/20200521" target="_blank" rel="noopener">announced</a> a sale of approximately 240 million shares of <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> - roughly 5.0% of shares outstanding - at a price of ¥1,306.5-1,320/share (a discount of 4.0-5.0% to the close that day of ¥1,375). It lowered the consolidated holding of Softbank Corp from 67.1% to 62.1% and was not unexpected given the fact that Softbank Group had previously <a href="https://group.softbank/en/news/press/20200323" target="_blank" rel="noopener">announced</a> a "JPY 4.5 trillion (USD 41 billion) Program to Repurchase Shares and Reduce Debt" on 23 March. This would lose Softbank Group the <em>super</em>-majority but that had to be expected eventually. </p>
<p>The block sale announced 21 May had been <em>preceded</em> by an announcement at the earnings results a day before that Softbank Group had sold $11.5bn of <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> shares and was followed a month later by the <a href="https://group.softbank/en/news/press/20200624" target="_blank" rel="noopener">announcement</a> of a sale of US$20bn of <a href="https://www.smartkarma.com/entities/t-mobile-us-inc" target="_blank" data-smartkarma-citation="entities:922:1" rel="noopener">T Mobile Us Inc (TMUS US)</a> which got them to ¥3.7trln of assets sold and cash raised. The Softbank Group <a href="https://group.softbank/system/files/pdf/ir/presentations/2020/investor-presentation_q1fy2020_01_en.pdf" target="_blank" rel="noopener">Q1 Investor Presentation</a> from 12 August showed that a slightly larger amount had been raised because of better execution on the forward sale of Alibaba shares, but it should be noted that had other costs associated. Other gains were made by selling other small positions and the write-back of previously-unrecognized NOL tax-loss carry-forwards at SBG due to the sale of Softbank Corp shares.</p>
<p>HUGE progress had been made, and the hindrance to Softbank's plans at this point are mostly market liquidity for their own shares. </p>
<h2>The NEW News</h2>
<p>Today (28 August) after the close, Softbank Group <a href="https://group.softbank/system/files/news/press/2020/20200828/pdf/20200828_en.pdf" target="_blank" rel="noopener">announced</a> a selldown of up to 1.028bn shares (the sale of 927.49mm shares is underwritten, and there are another 100.5mm shares in the greenshoe) of Softbank Corp, which would take its stake from 61.97% (62.47% including Treasury Shares) to 40.32% (40.64% incl Treasury shares immediately, 41.34% if the Softbank Corp buyback is executed), whereupon Softbank Group would hold its remaining position for the "medium-to-long-term."</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/595/original/Screenshot%202020-08-28%20at%205.28.04%20PM.png?1598606901" class="editor-image img-responsive" data-smartkarma-image-id="155595"></figure>
<p>Assuming the greenshoe gets done and the trade gets done at a 5% discount to the close (¥1431.5), it is a ¥1.4trln deal for 21.65% of the company. The fact that this has been mostly underwritten suggests brokers are confident the existing very high dividend yield will be attractive. </p>
<p>It is a sale targeted 75% to domestic investors and 25% to international investors.  Given the sale would lift minority-held shares out by 56.9% and likely lifts Real World Float by more than 80%, this is a deal which will be more SOLD than BOUGHT. </p>
<p>To partially mitigate the impact of the supply, Softbank Corp today <a href="https://www.softbank.jp/en/corp/set/data/news/press/sbkk/2020/20200828_01/pdf/20200828_01.pdf" target="_blank" rel="noopener">announced</a> a buyback program to buy back up to 80 million shares for up to ¥100bn to run from 1 October 2020 through 31 March 2021. Softbank Group will continue to treat Softbank Corp as a consolidated subsidiary. </p>
<p>This has potential repercussions on the sector dynamics near-term, the float, index supply/demand, etc. Much more detail below.</p>

On 21 May, Softbank Group (9984 JP)  announced a sale of approximately 240 million shares of Softbank Corp (9434 JP) - roughly 5.0% of shares outstanding - at a price of ¥1,306.5-1,320/share (a discount of 4.0-5.0% to the close that day of ¥1,375). It lowered the consolidated holding of Softbank Corp from 67.1% to 62.1% and was not unexpected given the fact that Softbank Group had previously announced a "JPY 4.5 trillion (USD 41 billion) Program to Repurchase Shares and Reduce Debt" on 23 March. This would lose Softbank Group the super-majority but that had to be expected eventually. 
The block sale announced 21 May had been preceded by an announcement at the earnings results a day before that Softbank Group had sold $11.5bn of Alibaba Group (BABA US) shares and was followed a month later by the announcement of a sale of US$20bn of T Mobile Us Inc (TMUS US) which got them to ¥3.7trln of assets sold and cash raised. The Softbank Group Q1 Investor Presentation from 12 August showed that a slightly larger amount had been raised because of better execution on the forward sale of Alibaba shares, but it should be noted that had other costs associated. Other gains were made by selling other small positions and the write-back of previously-unrecognized NOL tax-loss carry-forwards at SBG due to the sale of Softbank Corp shares.
HUGE progress had been made, and the hindrance to Softbank's plans at this point are mostly market liquidity for their own shares. 
The NEW News
Today (28 August) after the close, Softbank Group announced a selldown of up to 1.028bn shares (the sale of 927.49mm shares is underwritten, and there are another 100.5mm shares in the greenshoe) of Softbank Corp, which would take its stake from 61.97% (62.47% including Treasury Shares) to 40.32% (40.64% incl Treasury shares immediately, 41.34% if the Softbank Corp buyback is executed), whereupon Softbank Group would hold its remaining position for the "medium-to-long-term."

Assuming the greenshoe gets done and the trade gets done at a 5% discount to the close (¥1431.5), it is a ¥1.4trln deal for 21.65% of the company. The fact that this has been mostly underwritten suggests brokers are confident the existing very high dividend yield will be attractive. 
It is a sale targeted 75% to domestic investors and 25% to international investors.  Given the sale would lift minority-held shares out by 56.9% and likely lifts Real World Float by more than 80%, this is a deal which will be more SOLD than BOUGHT. 
To partially mitigate the impact of the supply, Softbank Corp today announced a buyback program to buy back up to 80 million shares for up to ¥100bn to run from 1 October 2020 through 31 March 2021. Softbank Group will continue to treat Softbank Corp as a consolidated subsidiary. 
This has potential repercussions on the sector dynamics near-term, the float, index supply/demand, etc. Much more detail below.

Softbank Corp (9434) BIGGER Block Offering

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, which reported its June quarter results in the previous week, Rakuten’s shopping business did well on the back of strong stay-at-home demand, which offset the negative impact of service DEC businesses like Rakuten Travel due to COVID-19. On the OP front, Rakuten missed consensus by around 22%, however, this was on the back of upfront investments in mobile and logistics operations.</p><p>We continue to prefer Rakuten among other Japanese e-commerce names, as we believe its strategy of improving monetisation of its existing users and increasing penetration into untapped markets through logistics expansion, better suits the maturing Japanese e-commerce market. We believe Rakuten, excluding its mobile and logistics businesses, is undervalued, however, we do not see any short term catalysts that would drive Rakuten’s share price up, especially as we expect Rakuten to continue making operating losses in the next two years as the company continues to invest heavily on its mobile and logistics operations. However, we like Rakuten for its long-term growth potential and expect further upside once investments in mobile and logistics operations start making meaningful contributions.</p>

Rakuten Inc (4755 JP)’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart Z Holdings (4689 JP), which reported its June quarter results in the previous week, Rakuten’s shopping business did well on the back of strong stay-at-home demand, which offset the negative impact of service DEC businesses like Rakuten Travel due to COVID-19. On the OP front, Rakuten missed consensus by around 22%, however, this was on the back of upfront investments in mobile and logistics operations.We continue to prefer Rakuten among other Japanese e-commerce names, as we believe its strategy of improving monetisation of its existing users and increasing penetration into untapped markets through logistics expansion, better suits the maturing Japanese e-commerce market. We believe Rakuten, excluding its mobile and logistics businesses, is undervalued, however, we do not see any short term catalysts that would drive Rakuten’s share price up, especially as we expect Rakuten to continue making operating losses in the next two years as the company continues to invest heavily on its mobile and logistics operations. However, we like Rakuten for its long-term growth potential and expect further upside once investments in mobile and logistics operations start making meaningful contributions.

Rakuten: Core Businesses Are Doing Well but Logistics and Mobile Investments Are Eating into Profits

Japan

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

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LY (4689 JP)

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

$2980

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/16 - Askul Begs a Question & East Japan [De]Rail[ed]way

• BEST & WORST • Our 'best' and 'worst' pairing from Wedrday's announcements is food and drink retailer Life (8194 JP) and parking lot...

Campbell Gunn

LINE: The Zombie Twilight Begins

LINE

Travis Lundy

Softbank Corp (9434) BIGGER Block Offering

On 21 May, Softbank Group (9984 JP) announced a sale of approximately 240 million shares of Softbank Corp (9434 JP) - roughly 5.0% of shares...

Travis Lundy

Rakuten: Core Businesses Are Doing Well but Logistics and Mobile Investments Are Eating into Profits

Rakuten Inc (4755 JP)’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart Z Holdings (4689 JP), which...

Supun Walpola

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

$2980

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​16 - Askul Begs a Question & East Japan [De]Rail[ed]way

• BEST & WORST • Our 'best' and 'worst' pairing from Wedrday's announcements is food and drink retailer Life (8194 JP) and parking lot...

Campbell Gunn

LINE: The Zombie Twilight Begins

LINE

Travis Lundy

Softbank Corp (9434) BIGGER Block Offering

On 21 May, Softbank Group (9984 JP) announced a sale of approximately 240 million shares of Softbank Corp (9434 JP) - roughly 5.0% of shares...

Travis Lundy

Rakuten: Core Businesses Are Doing Well but Logistics and Mobile Investments Are Eating into Profits

Rakuten Inc (4755 JP)’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart Z Holdings (4689 JP), which...

Supun Walpola

🇯🇵 JAPAN • Results & Revisions 09/16 - Askul Begs a Question & East Japan [De]Rail[ed]way