SoftBank Moves to Slash Alibaba Stake, Fueling $13 Billion Slump

(Bloomberg) — SoftBank Group Corp. is moving to sell the majority of its stake in Chinese internet giant Alibaba Group Holding Ltd., the Financial Times reported, the latest sign of long-time China investors lowering their exposure there.

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The Japanese technology investor has sold more than $7 billion in Alibaba shares this year through prepaid forward contracts, after selling $29 billion last year, according to the newspaper. The contracts give SoftBank the option to buy the shares back, but the group has settled previous deals by handing over the stock, the Financial Times reported.

Pummeled by losses on its startup bets, SoftBank has said it would prioritize financial discipline before seeking the right time to go on the offensive with investments. Investors are also speculating if the company will launch another buyback program.

Alibaba shares fell as much as 5.2% in Hong Kong on Thursday, erasing about $13 billion of market value. SoftBank shares were little changed in Tokyo after dropping about 8% this year through Wednesday’s close.

The sales will reduce the Japanese conglomerate’s ownership of Alibaba to less than 4%, the paper said, citing its analysis of regulatory filings. That’s down from around a 14.6% stake the company said it was slated to hold as of end-September. Softbank once owned about a third of the company spanning from an early $20 million investment in one of venture capital’s most famous bets.

“We think progress in the monetization of asset holdings would boost the chances of a buyback announcement,” said Citibank analyst Mitsunobu Tsuruo in a note to investors.

Read more: Alibaba Selldown Puts Focus on SoftBank Buyback

Alibaba, along with other technology companies, has come under intense scrutiny from the Chinese government in recent years, and its shares have tumbled. Last month, the online commerce leader said it plans to split its $240 billion empire into six units that will individually raise funds and explore initial public offerings.

SoftBank, once one of Silicon Valley’s largest investors, has shouldered billions of dollars of losses on its Vision Fund, which had lifted valuations in startups worldwide with its large bets on hundreds of fledgling companies.

It cut staff at its Vision Fund unit last year as it stopped actively chasing new investments. This week, SoftBank said it plans to sell its early-stage venture capital arm SoftBank Ventures Asia Corp., one of the avenues by which it scouted promising startups.

SoftBank’s billionaire founder Masayoshi Son has said he wants to focus on a planned listing of its chip design unit Arm Ltd. later this year and make the debut “the biggest” in the history of the semiconductor industry. The re-listing of Arm, which had traded on the London exchange prior to SoftBank’s $32 billion acquisition in 2016, is expected to be a big windfall for the world’s biggest technology investor.

Other long-time China investors have been lowering their exposure in China. Tencent Holdings Ltd. plunged this week on signs that its largest shareholder Prosus NV may extend the selling of the Chinese tech firm’s stock.

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 all-time high of $317 a share.

SoftBank did not immediately respond to a request for comment.

–With assistance from Catherine Ngai and Jeanny Yu.

(Updates with SoftBank and Alibaba share moves and analyst comment)