SoftBank Sells Alibaba Shares After 20-Year Partnership, Secures 44.4 Trillion Won in Cash

Chairman Masayoshi Son of SoftBank
[Photo by Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] SoftBank, which has embarked on cost-cutting measures after receiving a report card of its worst performance, has disposed of its stake in Chinese e-commerce company Alibaba, with which it has had a 20-year relationship, securing $34 billion (approximately 44.4 trillion KRW) in cash.

According to the Nihon Keizai Shimbun on the 11th, SoftBank sold part of its Alibaba shares the previous day, and the Alibaba stake, which was 23.7% as of the end of June, is expected to be 14.6% by the end of September. Foreign media predict that SoftBank will secure $34 billion in cash through this stake sale.

Earlier, on the 4th, a foreign media outlet reported SoftBank’s disposal of its Alibaba stake, and it appears SoftBank has confirmed this. At that time, the foreign media reported that SoftBank seemed to have secured $22 billion in cash through a prepaid forward contract sale, where it received money in advance secured by selling Alibaba shares.

What stands out about SoftBank’s disposal of Alibaba shares this time is that the stake has fallen below the 20% level. SoftBank has classified investment companies with stakes over 20% as affiliates for accounting purposes, and Alibaba was included in this category. Now that the stake has dropped below 20%, it is in the same position as other investment companies.

Alibaba is a special investment target for SoftBank. The relationship between the two companies began in 2000. Alibaba founder Jack Ma met SoftBank Chairman Masayoshi Son in 2000 and received a $20 million investment, which became the foundation for Alibaba’s growth into China’s largest e-commerce company. At one point, Alibaba shares accounted for as much as 70% of SoftBank’s assets. SoftBank was able to leverage this to secure funds for new investments or debt repayment, thereby expanding its business.

This news of the stake sale comes as SoftBank has been posting consecutive worst performances. On the 8th, SoftBank announced a net loss of 3.1627 trillion yen for the second quarter (April to June) of this year, the largest quarterly loss ever. Chairman Son said, "I want to remember as a lesson that SoftBank has posted such a large loss twice in a row and recorded a 5 trillion yen loss in six months," repeatedly saying, "I am ashamed," and "I am reflecting," bowing his head.

The Nihon Keizai Shimbun expects that SoftBank will secure accounting profits and achieve cost reduction effects through this stake disposal. It reported, "A profit of 4.6 trillion yen is expected in the July to September period of fiscal year 2022. This effect will be significant for SoftBank, which recorded losses in April to June." It also added that by disposing of shares through the prepaid forward contract this time, SoftBank’s interest burden will decrease.