(Bloomberg) -- SoftBank Corp. is planning to sell securities that are like bonds but are actually shares, betting that yield-hungry investors will flock to Japan’s first public offering of the unusual equities.
The telecommunications unit of billionaire Masayoshi Son’s holding company is targeting ¥120 billion ($808 million) in sales of the so-called bond-type class shares that will be listed on the Tokyo Stock Exchange, according to the statement filed to the financial authority.
SoftBank tentatively offered a dividend rate from 2.5% to 3% for the first five years, after which the company has the right to repurchase them at an amount equal to the issue price, according to the statement. That means the securities are similar to callable bonds. Unlike most shares they don’t give holders voting rights, and they also can’t be converted to common stock. Bloomberg reported earlier Monday that the company was planning a class share deal.
What’s likely to attract investors to the securities are SoftBank’s strong name recognition and the extra yields they offer at a time when interest rates in Japan remain at rock-bottom levels. Investors in the securities will also be able to enjoy tax exemption through the Nippon Individual Savings Account program, or NISA.
Investors in Japan have shown a willingness to take more risks as domestic interest rates lag the surge in their global counterparts. The Bank of Japan last week tamped down speculation of any near-term hikes, increasing concern that the nation’s ¥1,107 trillion pool of household savings may be drawn more and more to higher-yielding investments abroad, further weighing on the yen.
“Since the characteristics of the product are unfamiliar to retail investors, it is necessary to provide a good explanation” of how the SoftBank securities work, said Hiroshi Namioka, chief strategist at T&D Asset Management Co. He said the company’s name value, relatively high yields and NISA eligibility may attract individual investors.
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The funds will be used to establish services employing generative artificial intelligence that’s capable of creating contents such as text, images and program code, the construction of next-generation social infrastructure, and the development of new services, according to the statement.
SoftBank plans to sell 30 million shares for ¥4,000 each, and it will decide the final terms as soon as Oct. 13, according to the statement. The offering will be mainly aimed at individuals, as well as some institutional investors.
SoftBank will conduct a book-building process with bond and equity investors to decide the terms. Nomura Securities Co. will be the lead underwriter for the deal, and Mizuho Securities Co. and Daiwa Securities Co. will also handle the sale.
--With assistance from Yasutaka Tamura.
(Adds deal details based on SoftBank disclosure.)
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