Softbank Inc., a Japanese venture capital firm that has emerged as one the of largest investors in Internet technology companies, said it would sell 3.3 million shares of Yahoo Inc. stock, or roughly 3% of its 32% stake.
The privately negotiated transaction underscores the wealth of resources at Softbank's disposal - and its growing prominence in the financial markets. Softbank, which said it expects to use the proceeds to fund its global expansion efforts, says its core business is Internet-based business development. At 2:15 p.m. Friday, Yahoo was trading at 129.687, up 9.625.
Softbank is marshaling its resources in an effort to buy the failed Nippon Credit Bank, which is controlled by the Financial Reconstruction Commission, Japan's equivalent of the Resolution Trust Corp.
Softbank had been in an exclusive bidding process for the purchase and had planned to use Nippon Credit as a vehicle to fund Japanese start-ups, but it missed a government-imposed deadline for agreeing to terms for the Nippon Credit purchase. Japanese regulators have opened the bidding process to others, and Lehman Brothers and France's Banque Nationale de Paris are said to be interested.
Citing the company's difficulty in acquiring Nippon Credit Bank, Bert Ely, a bank consultant in Washington, described Softbank as an "overblown high flyer."
"I have seen this in the past where someone gains some success in a particular field, and they go through kind of a macho thing and branch out into something they know nothing about," Mr. Ely said. "If they are lucky, they do not get what they are shooting for," Mr. Ely said. "If they are unlucky, they will get it and then it will tank them."
Softbank has ownership positions in more than 300 Internet companies, and has struck oil in recent years in the U.S. market with early and substantial investments in what would ultimately become marquee Internet companies, including Yahoo, E-Trade Group Inc., and Ziff Davis Inc.
Softbank owns about 8% of E-Trade. It also has a controlling stake in the Internet advertising firm formerly known as First Virtual Holdings Inc., which it renamed MessageMedia Inc.
"In the VC world, just like in the buy side or sell side world, name and reputation means everything, and Softbank is the equivalent of Goldman Sachs, the mecca of the sell-side world," said Jeffery Baker, an analyst at SunTrust Equitable Securities. "They were early in the space and made the right bets, and now they are perceived as all-knowledgeable."
Softbank was formed in 1981 as a distributor of prepackaged software for personal computers. By 1993 it had branched into publishing and distributing computer magazines. It had remained in that business and cultivated ancillary ones, such as technology consulting, until last year, when it spun off three separate companies in Japan.
U.S. observers say Softbank, which has most of its 1,000 employees based in Japan, has assumed a central position in the development of the digital economy.
In May, Softbank Venture Capital, the U.S.-based arm in Mountain View, Calif., raised $1.5 billion in new capital from large institutional investors to manage all of Softbank's U.S. private equity activities.
In February, Softbank teamed up with International Finance Corp., part of World Bank Group, to found Softbank Emerging Markets, a group that will invest in the digital economies of developing areas, such as China and Latin America. Softbank chipped in $200 million of the fund's $500 million. This effort will also act as an incubator of technology companies. Incubators lend financial, administrative, and business acumen support to start-ups.
Mr. Baker said these incubators help start-ups deal with administrative duties, provide office space, and lend legal and human resources support until the companies become established and capable of handling these duties in-house.
"It can really bog down a new company if they are not used to it," Mr. Baker said. "These companies will go to an incubator, who says, 'Come work in our space. We will sublet it to you. You can use our human resources department, our accounting department, our attorneys, the whole nine yards.'"
James Marks, an analyst at Credit Suisse First Boston, said Softbank is a prominent participant in the Internet financial markets and one of the most active investors in Web-based financial services companies. But he said he wonders whether "it can leverage their multiple investments in interwoven companies."
"Will the whole be greater than the sum of its parts?" he asked.
Mr. Ely, the banking consultant, wondered why the company wants to expand into an area of business where it has little or no experience. Softbank president Masayoshi Son is an investor - "an Internet player, not an operating guy," Mr. Ely said.
Softbank's stock, which trades on the Tokyo stock exchange, has fallen about 70% this year, in lockstep with the rest of the technology market.
Nippon Credit Bank is one of three wholesale credit banks in Japan. The others are Long Term Credit Bank, which like Nippon Credit is held by the Financial Reconstruction Commission, and the Industrial Bank of Japan,
"These attempts to buy these banks do not make any sense to me," Mr. Ely said. "There is no retail franchise there. They are dinosaurs, which is essentially why they are disappearing."