Fallen Son Jeong-ui... China Alibaba Sells Another 9 Trillion Won Worth

SoftBank Earnings Deficit to Continue for 2 Years

Japan's SoftBank, facing financial difficulties due to consecutive investment failures, has sold its stake in China's Alibaba once again. Following the plunge in stock prices of key investment companies caused by regulatory impacts from Chinese authorities, investment losses have snowballed, leading to continued sell-offs this year after last year. There are also forecasts that SoftBank's deficit trend due to worsening investment performance will continue this year and into next year.

According to major foreign media on the 12th (local time), the Vision Fund, the world's largest technology investment fund led by SoftBank Group Chairman Masayoshi Son, sold Alibaba shares worth $7.2 billion (approximately 9.53 trillion KRW) so far this year. With this sale, SoftBank's stake in Alibaba has decreased to 3.8%.

Foreign media reported that as a recession makes further declines in the stock prices of key investment targets, Chinese technology companies, inevitable, SoftBank is focusing on selling its Alibaba shares to secure liquidity.

To immediately address the urgent liquidity issue, the share sale was conducted through a "prepaid forward contract" method. This method, which allows receiving part of the sale amount in advance secured by future stock sales, enabled SoftBank to secure $29 billion in cash last year as well. Although this deal includes an option for SoftBank to repurchase Alibaba shares, foreign media say the likelihood of this is low.

This share sale coincided with SoftBank's decision to list its subsidiary, the UK fabless semiconductor design company ARM, on the US stock market, aiming to minimize investment failures and unprecedented loss expansion.

SoftBank's Deficit to Continue for 2 More Years

As investment losses snowballed and business performance plummeted, SoftBank began selling Alibaba shares at low prices starting last year.

According to Washington Service, a financial information provider, the average sale price of Alibaba shares sold by SoftBank over the past 1 year and 2 months was $92 per share, less than one-third of the all-time high of $317.

Regarding this, The Wall Street Journal (WSJ) evaluated that the era of Chairman Son, who amassed enormous wealth by investing in Chinese companies, has come to an end.

The market interprets such low-price sales as a signal lowering expectations for performance recovery. Securities analysts forecast that SoftBank will continue to post deficits for at least two years starting this year.

The Fall of the 'Investment Genius' Who Made 2000x Returns

SoftBank began to gain attention as a venture investment genius after its successful investment in Alibaba. Chairman Son invested $20 million (approximately 2.25 billion KRW) in Alibaba, China's largest e-commerce company, in 2000, and when Alibaba went public on the New York Stock Exchange in 2014, its value soared, yielding returns 2000 times the initial investment.

Riding this momentum, SoftBank established the Vision Fund in 2017 to invest heavily in promising technology companies, but the deterioration of key Chinese investments led to a disastrous decline.

Chinese ride-hailing company Didi Chuxing, listed on the New York Stock Exchange, voluntarily delisted amid government pressure over data leak concerns, and Alibaba, where SoftBank held a major shareholder position, saw its stock price plunge 70% due to intensified regulations and worsening performance.

SoftBank's stock price, which moves according to investment performance, has plummeted to levels seen six years ago amid continued sell-offs due to investment failures.

Regarding this transaction, SoftBank stated, "We have shifted to defense mode amid an uncertain business environment," adding, "We will focus on increasing cash, securing liquidity, and strengthening financial stability." The funds raised from the Alibaba stake sale are expected to be reflected in the first-quarter business results (company fiscal year 2022 Q4) to be announced next month.