SoftBank Raises $22 Billion as it sells its stakes in Alibaba

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The world’s largest tech investor SoftBank has raised $22 billion from deals that would reduce its stake in Alibaba, the multinational Chinese e-commerce platform.

The Japanese tech company was one of Alibaba‘s first investors and has raised this money through selling prepaid forward contracts using Alibaba Group Holding Ltd. shares.

SoftBank has reduced its shares in Alibaba by almost a third through prepaid forward contracts, a contract that lets the company raise funds immediately whilst holding onto its shares, the Financial Times reported.

In the Financial Times News Briefing, FT’s China Tech Reporter Ryan McMorrow explained: “Masayoshi Son, the chairman of SouthBank, has been side-by-side with Jack Ma the founder of Alibaba over the past two decades since he started the company, so it’s definitely a big deal that they’re now selling down their stake, and if all these shares rollover they could be down to about 10%.”

McMorrow went on to explain that the share sales are less about friction between Son and Ma and more about ensuring a delayed execution: “It’s more about turmoil in the market and in their last physical year they had a huge $27 billion loss in their vision fund and they’re trying to play defense as their holdings get hit, and Alibaba is the only large asset they have that they can ‘tap’ for cash.”

SoftBank has raised funds using Alibaba shares in the past — about $13.7 billion was raised through Alibaba shares from contracts, rollovers and termination of current contracts.

A global stock market downturn impacted SoftBank’s earnings and the valuation of its investments continue to decline, which has raised concerns over its stability.

This year, Mizuho, Goldman Sachs and UBS have all participated in the forward sales of 213 million Alibaba shares this year, which can delay a final handover by two years, according to the report.