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SoftBank Gives Up a Third of Alibaba Stake for a $34 Billion Profit

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SoftBank Gives Up a Third of Alibaba Stake for a $34 Billion Profit
SoftBank Gives Up a Third of Alibaba Stake for a $34 Billion Profit

SoftBank Group Corp. expects to post a profit of more than $34 billion from the sale of its stake in Alibaba Group Holding Ltd. leveraging its most historic investment to shore up finances as global markets deteriorate.

The move increases the likelihood that SoftBank will reduce its stake in Alibaba over time. Alibaba of the Japanese company falls below the 20% threshold. That’s to count the Chinese e-commerce giant as a stock subsidiary.

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A series of record losses in falling technology valuations. It has raised concerns about SoftBank’s financial stability prompting founder Masayoshi Son. Financial stability speeds up asset sales and emphasizes pure return on investment over strategic synergies between his holdings.

Investors have long pressed SoftBank to cash out its shares in Alibaba. Investors monetizing one of the most lucrative bets in venture capital history. And one that made Son’s reputation as a startup investor. It may also be the opportune time to reduce exposure to regulatory uncertainties roiling the world’s No. 2 economy, and SoftBank has been trying to reduce its holdings there.

“Competition in China’s e-commerce space is heating up with many new entrants,” said Bloomberg Intelligence analyst Marvin Lo. “It may not be easy for Alibaba to stay on top forever.”

SoftBank has raised money by selling derivatives tied to Alibaba shares for years, SoftBank opting for such complex transactions rather than a direct sale. The complex transaction is to reduce pressure on the Chinese company’s share price. In the past four months, it raised a huge amount of capital by selling forward contracts on Alibaba. The raising is $10.5 billion during the June quarter and another $6.8 billion through such contracts starting July 1.

The physical settlement of contracts means that SoftBank will waive its right to buy back the shares in the future, as it has often done. A rare moment when SoftBank pledged to reduce its Holdings in Alibaba was in 2016 when it needed to fund its chip architect Arm Ltd.

Son said he will play defense and reduce costs across all SoftBank operations. The investment group has begun talks to sell asset manager Fortress Investment Group. They are selling some or all of its 9% stake in SoFi Technologies Inc.


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