(Bloomberg) — SoftBank Group Corp. is moving to sell most of its stake in Chinese Internet giant Alibaba Group Holding Ltd., the Financial Times reported, the latest sign that investors from China have long since time are reducing their exposure there.
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The Japanese tech investor has sold more than $7 billion of 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 back the shares, but the group has liquidated previous deals by handing over the shares, the Financial Times reported.
Hit by losses in its early bets, SoftBank has said it will prioritize financial discipline before looking for the right moment to go on the offensive with investments. Investors are also speculating whether the company will launch another buyback program.
Alibaba shares fell as much as 5.2% in Hong Kong on Thursday, wiping out about $13 billion of market value. SoftBank shares were little changed in Tokyo after falling about 8% this year through Wednesday’s close.
The sales will reduce the Japanese conglomerate’s ownership of Alibaba to less than 4%, the newspaper said, citing its analysis of regulatory filings. That’s less than a stake of about 14.6% that the company said it was scheduled to hold by the end of September. Softbank once owned around a third of the company that encompassed an initial $20 million investment in one of venture capital’s most famous bets.
“We believe that progress in monetizing asset holdings would increase the chances of a buyback announcement,” Citibank analyst Mitsunobu Tsuruo said in a note to investors.
Read more: Alibaba Selldown puts spotlight 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 plummeted. Last month, the online commerce leader said he plans to split his $240 billion empire into six units that will individually raise funds and explore initial public offerings.
SoftBank, once one of Silicon Valley’s biggest investors, has taken billions of dollars in losses on its Vision Fund, which had boosted valuations of startups around the world with its big bets on hundreds of start-ups.
It cut staff at its Vision Fund unit last year as it stopped actively seeking new investment. This week, SoftBank said it plans to sell its early-stage venture capital arm SoftBank Ventures Asia Corp., one avenue by which it scouted promising startups.
SoftBank’s billionaire founder Masayoshi Son has said he wants to focus on an expected listing of his Arm Ltd. chip design unit later this year and debut as “the biggest” in chip industry history. the semiconductors. The relisting of Arm, which he had listed on the London Stock Exchange before its $32 billion acquisition of SoftBank in 2016, is expected to be a huge windfall for the world’s biggest technology investor.
Other Chinese investors have long been reducing their exposure to China. Tencent Holdings Ltd. slumped this week on signs that its largest shareholder, Prosus NV, may extend the sale of shares in the Chinese tech firm.
Over the past 14 months, SoftBank earned an average of $92 per share from forward sales of 389 million Alibaba shares, the Financial Times said. That value is far less than the company’s all-time high of $317 per share.
SoftBank did not immediately respond to a request for comment.
–With the assistance of Catherine Ngai and Jeanny Yu.
(Updates with SoftBank and Alibaba stock moves and analyst commentary)
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