Finimize - 🤝 SoftBank's in demand (again)

What’s going on here?

Activist hedge fund Elliott Investment Management snapped up shares in SoftBank, eager to whip the Japanese tech giant into shape.

What does this mean?

Activist investors buy major stakes in companies so they can impact key decisions, with an aim to make a profit or create more value for shareholders. In this case, Elliott wants to use its stake in SoftBank to force the company to buy back $15 billion of shares, which should reduce their supply and – all else equal – increase their price. Elliott has a track record to back the plan up, too: the hedge fund has previously taken hefty stakes in Japanese real estate firm Mitsui Fudosan and printing company Dainippon Print, before leading them both to significant buybacks. No wonder, then, that SoftBank’s share price jumped 5% after news broke of Elliott’s fresh stake.

Why should I care?

Zooming in: Take two will take two.

Elliott pulled off this exact play a few years ago. The firm bought SoftBank shares, pushed the company toward a buyback, and then sold the stock for a profit when the shares increased in value. And SoftBank can afford another round: it’s saved up cash by being careful in the last few years, burned by disastrous investments like its WeWork punt. It’s been making money elsewhere, too: SoftBank’s stake in its famed Vision Funds is valued at around $51 billion, and the company owns a 90% stake in UK chip designer Arm, which is now worth $86 billion.

The bigger picture: Japan’s lovely this time of year.

Activist investors are being drawn to Japanese companies, partly due to government reforms that aim to make the country’s businesses more profitable for shareholders. Private equity firms are also flocking to the Land of the Rising Sun to do what they do best: take companies private. After all, there are loads of firms that want to keep all the takings for themselves.

What’s going on here?

China’s overzealous factories have already provoked glares from around the world, and they’re only going to intensify now that the country’s exporters have branched out beyond high-tech products.

What does this mean?

Trade spats with China are nothing new. In fact, the US brought in more tariffs just last month, and the EU will consider dishing out taxes on Chinese EVs next week. See, China’s real estate slump is making folk spend less, because much of their financial confidence is tied to the value of their homes. So Chinese producers have been flooding the global market with leftovers of EVs and green tech – and now, they’re shipping out everything from steel to animal feed at rock-bottom prices that are near impossible to compete with.

Why should I care?

Zooming out: Neither here nor there.

China was hit with a record number of taxes last year, all designed to stem the flow of ultra-cheap exports. They weren’t just from the US and Europe either: a lot of the pushback came from countries like India and South Korea. But China’s not slowing down: its iron and steel exports hit a record 13 million tons in March and April. What’s more, the country’s on track to produce a billion tons of steel again this year – a lot of which will end up being shipped abroad. And as China’s factories keep churning out exports, more countries might join in retaliating.

The bigger picture: Pieces of the pie.

The choice for countries is tricky: impose tariffs and risk retaliation, or do nothing and watch local businesses go under. To make matters worse, the International Monetary Fund recently warned that the breakdown in trade relationships could slash global economic output by up to 7% in the next few years. That would hit countries like China, Japan, and South Korea hardest, because they rely most on international trade.