Japanese multinational conglomerate SoftBank Group Corp SFTBY has raised $22 billion in cash through deals that would significantly trim its stake in Alibaba Group Holding Ltd. BABA over the coming years, reported Financial Times.
What Happened: The group, led by billionaire Masayoshi Son, conducted the sale of about a third of its stake in Alibaba through prepaid forward contracts this year, the report stated, citing filings FT had accessed.
These are derivative contracts that have enabled SoftBank to raise cash immediately with the possibility of retaining the shares in the firm.
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The forward sales of 213 million shares this year were struck with Goldman Sachs Group Inc. GS, Mizuho and UBS Group AG UBS, Financial Times reported.
Since October, SoftBank has turned over 40 million shares to conclude previously agreed upon deals that reduced its stake in the firm to 23.9% in mid-July from 24.8% earlier, as per the report.
Stake: SoftBank has so far sold more than 50% of its stake in Alibaba through these contracts, which could reduce its holding in the e-commerce giant below the threshold required to hold a board seat. This could also stop the Japanese conglomerate from recognizing its income from Alibaba in its financial statements, according to the report.
SoftBank’s Losses: The Japanese group has seen dozens of its investments in its Vision Fund plunge post a sell-off in tech stocks. In May, Son told investors he would play “defense” after revealing a $27 billion loss in Vision Fund in the previous financial year, according to the report.
Price Action: SFTBY shares ended Wednesday nearly 7% higher at $20.87, before falling 1.4% in extended trading, according to data from Benzinga Pro.
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