Alibaba Falls as Stock Filing Seen as Sign of SoftBank Sale

(Bloomberg) — Alibaba Group Holding Ltd. shares dropped 6.1% in U.S. trading on Monday after Citigroup Inc. analysts saw its additional American depositary share registration in the U.S. as a sign that SoftBank Group Corp. may sell part of its stake.

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Analysts at JPMorgan Chase & Co also said in a note to clients that the further one billion ADS registration indicates some of the insiders, either management or early investor SoftBank, might dispose of Alibaba shares in the near future.

A potential stake sale by SoftBank, coupled with weak online consumption, will continue to weaken sentiment toward Alibaba’s shares, battered last year along with other Chinese technology peers by Beijing’s regulatory crackdowns. The stock is down 3.4% this year and more than 63% below its October 2020 highs.

SoftBank owns 5.39 billion ordinary Alibaba shares, equivalent to 673.76 million ADSs, or a 24.8% stake, according to Citi’s calculations. Masayoshi Son’s SoftBank has faced pressure from investors in recent months as the value of many portfolio companies, including Didi Global Inc., One 97 Communications Ltd. and DoorDash Inc. was dragged lower by the technology downturn.

Alibaba filed a form on Friday with the Securities and Exchange Commission of the U.S. to register an additional one billion ADSs, each representing eight ordinary shares. The filing will allow its stockholders whose shares have never been registered with the regulator to have the flexibility to sell stock, Citi said. The registration could also cover the company’s need to issue new shares for an employee equity incentive plan.

Led by Alibaba’s rout, the Nasdaq Golden Dragon China Index fell 1.9% on Monday after China shares overnight showed strong momentum following a week-long holiday. The gauge closed 8% higher last week, its biggest rally in about two months.

(Updated with share moves at close)