SoftBank Group shares are experiencing a surge following the announcement that the company will be receiving $7.6 billion worth of T-Mobile shares as part of a contingent payout. This payout is tied to the sale of wireless carrier Sprint in 2020.
A Lucrative Deal
Back in 2013, SoftBank acquired Sprint and went on to sell the company to T-Mobile in a remarkable all-stock deal valued at $26 billion.
Terms of the Transaction
As part of the agreement, T-Mobile committed to issuing 48,751,557 shares to SoftBank if the 45-day trailing volume-weighted average price of T-Mobile shares surpassed $150, adjusted for dividends. Thanks to a recent dividend payment of 65 cents, the threshold price has been lowered to $149.35.
Positive Developments
In a recent regulatory filing, T-Mobile confirmed that the 45-day volume-weighted price surpassed the threshold on December 22nd. Consequently, T-Mobile has pledged to promptly issue the additional shares to SoftBank.
This development has prompted SoftBank to acknowledge that it had set aside $5.666 billion for the contingent value of the additional T-Mobile shares on its balance sheet as of September 30th. Following the payout trigger, the company will record a gain of $1.925 billion.
SoftBank’s Increased Stake
SoftBank’s stake in T-Mobile now stands at 7.6%, as revealed by another filing. This means that SoftBank’s position is currently valued at approximately $14.4 billion.
Future Plans Remain Uncertain
As of yet, SoftBank has not indicated its plans for this increased stake in T-Mobile. The Japanese holding company also holds a 90% stake in Arm Holdings, with a value exceeding $68 billion, among other assets. Additionally, SoftBank manages the Vision Fund and Vision Fund 2 venture capital portfolios.
Positive Market Response
SoftBank’s American depositary receipts have seen a rise of 2.5% in U.S. trading, reaching $22.32. It is worth noting that the company typically trades at a significant discount to its underlying net asset value. Currently, SoftBank’s market cap is $65.4 billion, which is lower than the value of its stake in Arm. In Tokyo trading, SoftBank shares have rallied 4.2% on Wednesday.