SoftBank shares drop following ARM acquisition announcement

Yesterday it was announced that Japanese corporation SoftBank is buying UK-based chip maker ARM in a £24 billion deal, to be completed through a combination of cash and loans.

“ARM will be an excellent strategic fit with the Softbank group as we invest to capture the very significant opportunities provided by the internet of things,” said Masayoshi Son - chairman and chief executive of Softbank - but it seems the stock market isn't quite so optimistic.

SoftBank shares have fallen 10 per cent, with investor concerns revolving around the company's $113 billion debt load and the challenges associated with carrying out multiple major acquisitions - following the purchase of Vodafone's Japanese operations and US telecoms firm Sprint - in the space of a few years.

SoftBank shares fell 11.3 per cent in Tokyo in the aftermath of the announcement - the biggest one-day drop since October 2012 - before closing at 10.3 per cent down.

Makoto Kikuchi, chief executive of Myojo Asset Management, said: “SoftBank has taken on another big risk for its balance sheet before it becomes clear when Sprint will start making a clear contribution to profits. Mr Son needs to explain more in detail how and when this latest acquisition will generate synergy and drive profit growth.”

Shares in Sprint also fell 8 per cent amidst concerns that the ARM acquisition means SoftBank will not have the capacity or resources to invest in the mobile carrier.