SoftBank Group Corp. is planning to sell the majority of its stake in Alibaba Group Holding Ltd., according to a report by the Financial Times. This is the latest indication that long-time investors in China are reducing their exposure in the country.
SoftBank, a Japanese tech investor, has sold more than $7 billion worth of Alibaba shares this year through prepaid forward contracts, after selling $29 billion worth of shares last year. These contracts give SoftBank the option to buy back the shares, but the company has settled previous deals by handing over the stock. SoftBank has said it will prioritize financial discipline before seeking the right time to invest again, having been pummeled by losses on its startup bets. Investors are also speculating whether the company will launch another buyback program.
The sales will reduce SoftBank's ownership of Alibaba to less than 4%, down from around a 14.6% stake the company held as of end-September. Softbank once owned about a third of the company, from an early $20 million investment in one of venture capital's most famous bets.
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 suffered 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 also been reducing their exposure to the country. 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 has made an average of $92 per share from the forward sales of 389 million Alibaba shares, much less than the company's all-time high of $317 a share.