SoftBank to Reduce Stake in Alibaba to Build Economic Moat
SoftBank has announced that it is reducing its stake in the Chinese e-commerce giant Alibaba to raise funds after a turbulent first quarter.
Aug. 11, 2022

SoftBank Group (TYO: 9984) has recently announced that it will reduce its stake in the Chinese e-commerce giant Alibaba Group (NYSE: BABA). The online retailer was once the crown jewel of the investment fund founded by CEO Masayoshi Son who invested $20 million in 2000. This stake was worth roughly $60 billion when Alibaba went public in 2014. 

Why is SoftBank selling part of its stake in Alibaba?

Softbank expects to generate a gain of roughly $34 billion after a recent investment spree led the company to account for a record loss of $23 billion in the previous quarter. This comes two days after the company sold off its holdings in Uber Technologies (NYSE: UBER).

SoftBank expects its share of Alibaba to fall to 14.6% by the end of September, down from 23.7% as of June 30th. This will result in SoftBank switching its accounting system from including a portion of the e-commerce company's profits as its own. 

The Japanese investment conglomerate said the decision to sell its shares was to provide a "defense against the severe market environment" and would ease concerns about future cash outflows while cutting costs. 

SoftBank said it forecast a contribution to pre-tax income of $34 billion due to its Alibaba sale. The largest portion comes from accounting for the remaining Alibaba shares on SoftBank's books at market value.

SoftBank has recently been trying to stock up on cash. In its most recent earnings report, SoftBank had a cash supply of 4.6 trillion yen, roughly $34 billion. This is over double the 1.8 trillion yen it said was needed to repay its corporate bonds over the coming two years. 

Both stocks have seen their share prices decline this year, with Alibaba's share price dropping by 23.22%, while SoftBank dropped by only 3.05% this year-to-date.



The Home of Successful Investing.

© 2023 MyWallSt Ltd. All rights reserved.


Services

Content

Social

Company

Support


This website is operated by MyWallSt Ltd (“MyWallSt”). MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice. MyWallSt Limited does not take your specific needs, investment objectives or financial situation into consideration, and any investments mentioned may not be suitable for you. You should always carry out your own independent verification of facts and data before making any investment decisions, as we cannot guarantee the accuracy or completeness of any information we publish and any opinions that we publish may be wrong and may change at any time without notice. If you are unsure of any investment decision you should seek a professional financial advisor. MyWallSt Limited is not a registered investment adviser and we do not provide regulated investment advice or recommendations. MyWallSt Limited is not regulated by the Central Bank of Ireland. MyWallSt Limited may provide hyperlinks to web sites operated by third parties. Your use of third party web sites and content, including without limitation, your use of any information, data, advertising, products, or other materials on or available through such web sites, is at your own risk and is subject to the third parties' terms of use.