ARM's shareholding exceeds its own market value, SoftBank's large-scale repurchase "logically consistent"

As the holding value of ARM, a chip manufacturer, exceeds its own market value, SoftBank Group, a Japanese conglomerate, announced a $3.5 billion share buyback plan on August 7th. This move has been warmly welcomed by investors.

Regarding the reasons for SoftBank's large-scale buyback this time, some media outlets pointed out:

In fact, SoftBank is buying its own assets at a significant discount, providing a buffer in case tech valuations fall again. Due to the limited number of ARM's outstanding shares, it is difficult for SoftBank to cash out its stake on a large scale. In addition, ARM's stock price seems to be quite expensive, with a projected P/E ratio of 73 times, far higher than Nvidia's 38 times.

In recent years, SoftBank has experienced roller-coaster-like fluctuations, especially its investment portfolio, including the $100 billion Vision Fund supported by Saudi Arabia, plummeted due to the tech downturn triggered by the pandemic. SoftBank previously reported three consecutive years of losses as of March.

However, driven by the current AI boom, the value of the 88% stake in ARM held by SoftBank has soared, pushing its stock price to a historic high last month.

Subsequently, ARM's stock price has declined, and due to recent selling pressure in the Japanese stock market, the stock has fallen by about 37%. Additionally, due to ARM's sales forecast released last week falling below analysts' expectations, its stock price plummeted by 16% in a single day. Some analysts believe that SoftBank's announcement of repurchasing up to 6.8% of its own shares may be quite advantageous timing.

As of Wednesday's close, ARM closed at $107.09, down 5.56%.

However, ARM's stock price has more than doubled since its initial public offering in September. The construction of data centers has also driven the demand for chips based on ARM architecture, with analysis indicating that there is still room for ARM to increase the royalties chip manufacturers pay to use its designs.

It is worth noting that SoftBank's stock price has not risen to the same level, as of Tuesday's closing, SoftBank's stake in ARM is valued at approximately $105 billion, far exceeding its own market value of about $73 billion.

On the same day, SoftBank estimated its net asset value to be around $170 billion, which means its stock is trading at nearly 60% below its theoretical value