SoftBank sells more of its holding in Alibaba, leaving it at about 4%
SoftBank is moving to sell more of its stake in Chinese internet giant Alibaba Group, unwinding the bet that spurred the Japanese company’s ambition to invest billions of dollars in start-ups.
SoftBank has offloaded about $7.3bn in Alibaba shares so far this year through prepaid forward contracts, according to a Bloomberg analysis of regulatory filings. That follows the company’s sale of shares through similar contracts in 2022, which cut its stake to 13.7% at endDecember. These contracts include the option to either hand over the stock or pay in cash and keep the shares.
Hit by losses on its bets on hundreds of start-ups, SoftBank has said it will prioritise financial discipline and virtually halted new investments. Analysts speculate on what asset sales might be ahead.
The sales will cut the Japanese conglomerate’s ownership of Alibaba to less than 4%, the Financial Times reports, citing its analysis of the filings. SoftBank once owned about a third of the group, most of which came from an early $20m investment in one of venture capital’s most famous bets.
A SoftBank spokesperson declined to comment on anything beyond the filings.
The move is the latest sign that long-time believers in China’s growth are reducing exposure there, despite statements from Beijing that it welcomes foreign investment. Alibaba’s share price fell 2% in Hong Kong on Thursday, denting a stock recovery sparked by hope that Beijing’s grip on tech firms might be easing.
SoftBank fell 1% in Tokyo. Heavily indebted SoftBank tapped its stake in Alibaba in 2022, cashing in on its most storied investment to help shore up finances amid uncertainty about Beijing’s stance on private enterprises.
The sale “reflects issues with SoftBank, rather than Alibaba, and has no bearing on Alibaba’s fundamentals, which are improving, or fair value, which is not a consideration for SoftBank,” said Vey-Sern Ling, MD at Union Bancaire Prive.
“There will be pressure on Alibaba’s share price as always with such events, but it would be short-lived.”
Alibaba, along with other tech companies, came under intense scrutiny from the Chinese government in recent years. In March the online commerce leader said it planned to split its $240bn empire into six units that would individually raise funds and explore initial public offerings, buoying its shares.
Once one of the world’s most aggressive tech investors, SoftBank lost billions of dollars in its Vision Fund, which lifted valuations in start-ups worldwide with its big bets on hundreds of fledgling companies. It has since almost halted new investments.
SoftBank cut staff at its Vision Fund unit in 2022 as it stopped chasing new investments. This week, SoftBank said it planned to sell its early-stage venture capital arm SoftBank Ventures Asia, one of the avenues by which it scouted promising start-ups.
The billionaire founder of SoftBank, Masayoshi Son, has said he wants to focus his energies on a planned listing of its chip design unit Arm later in 2023 and make the debut “the biggest” in the semiconductor sector’s history.
The relisting of Arm, which traded on the London exchange before SoftBank’s $32bn acquisition in 2016, is expected to be a big windfall for the world’s biggest technology investor. Son has said Arm will probably go public on Nasdaq.
SoftBank’s Alibaba stake has helped it secure financing for its Arm purchase and served to ease creditors’ concerns about its vast holdings in unproven start-ups.
But its exposure to both Alibaba and Chinese technology companies has weighed on the Japanese investor, even as prospects of big investment gains dimmed.
Over the past 14 months, SoftBank brought in an average of $92 a share from the forward sales of 389-million Alibaba shares, the Financial Times said. That value is much less than the company’s historic high of $317 a share.
SoftBank shares also shed about 25% since it failed to announce a new share buyback programme in November, a strategy that helped boost its stock price in the past.
“We think progress in the monetisation of asset holdings would boost the chances of a buyback announcement,” said Citibank analyst Mitsunobu Tsuruo in a note to investors.
In March, SoftBank transferred the bulk of its Alibaba holding to a wholly owned subsidiary, saying it was to better manage the shares and for “future financing”.
Other long-time China investors have also been lowering their exposure in China.
THE MOVE BY SOFTBANK IS THE LATEST SIGN THAT LONG-TIME BELIEVERS IN CHINA’S GROWTH ARE REDUCING EXPOSURE THERE