Economic Observer Reporter Qian Yujuan On the evening of August 10, SoftBank Group issued an announcement stating that SoftBank's board of directors has approved the settlement of several prepaid forward contracts it had previously signed with counterparties of several financial institutions. These contracts were concluded by SoftBank to use some of its Alibaba shares to raise funds.
SoftBank Group announced that it will reduce its holdings of approximately 242 million shares of Alibaba American depositary shares by settlement of prepaid forward contracts, accounting for approximately 9% of the total number of Alibaba's issued shares.
reduces its holdings in Alibaba , and loses its nomination right
In the past two years, SoftBank Group has signed several prepaid forward contracts through investment bank brokerage. It can exchange for the shares delivered when the contract is concluded through cash settlement, or it can also retain the cash obtained when the contract is concluded through share settlement.
"If you don't take back your shares, it's really sold." Chen Da, executive director of Hehe Shouchuang (Hong Kong), who focuses on US stock investment analysis, noticed that unlike the plunge after the financial report was issued, before the U.S. stock market closes on August 10, Eastern Time, SoftBank Group (stock code: SFTBY)'s stock price was "still calm", closing at US$20.4 per share, with rising by 5.1%; Alibaba (stock code: BABA) also closed at US$92.43 per share, an increase of 1.36%.
Chen Da judged, "The smart Mr. Market has digested this news in advance." You can also see it from the disclosure of SoftBank Group's announcement.
For the above-mentioned advance forward contracts settled in shares, SoftBank Group stated that it will not cause the counterparty of various financial institutions to sell additional Alibaba shares to the market, because before the above-mentioned monetization transaction occurred, the market had already conducted hedging .
Chen Da feels that the method, term and quantity of SoftBank Group’s reduction of holdings for Alibaba shares is clearer than the method of reducing holdings that is unlimited and unlimited. It is reported that the above-mentioned share settlement will start in mid-August 2022 and is expected to be completed by the end of September 2022.
's sale not only allowed SoftBank Group to obtain 4.6 trillion yen (equivalent to approximately RMB 232.8 billion), but also allowed it to hold Alibaba Group's shares from 23.7% to 14.6% after the settlement was completed. Even though SoftBank Group is Alibaba's only major shareholder with a shareholding of more than 5%, its nomination rights to Alibaba's board of directors will also be lost after the shareholding ratio drops below 15%.
was on the Alibaba board of directors when SoftBank Group suffered its first loss in 2019, with a loss of 1.37 trillion yen (equivalent to approximately RMB 69.3 billion), SoftBank Group founder Masayoshi Son was still on the Alibaba board of directors.
In March 2020, SoftBank Group slightly reduced its holdings of Alibaba shares and cashed out US$15 billion. In just three months afterwards, Masayoshi Son withdrew from Alibaba's board of directors. This action also directly released the signal that SoftBank had to cash out by reducing its holdings of Alibaba shares.
SoftBank suffered huge losses, and Masayoshi Son reflected on "apologizing"
"Previous share settlement will eliminate concerns about SoftBank's future cash outflow, reduce costs related to prepaid forward contracts, and further strengthen its defense capabilities against the severe market environment." SoftBank Group stated in the announcement.
Just two days before the release of the above-mentioned advance forward contract settlement news, on August 8, SoftBank Group released its second quarter financial report this year, with a net loss of 3.16 trillion yen (equivalent to approximately RMB 158.9 billion).
This report card also set a record of SoftBank Group's history - "the biggest loss in a single quarter". On the same day, Masayoshi Son made an hour-long "self-criticism" about this. He said, "I am ashamed of my past greed for huge profits."
In early 2020, when talking about SoftBank's future, Masayoshi Son said, "It doesn't look bad." By June 2020, he said, "hold Alibaba stocks as long as possible." A bigger change occurred in 2021. SoftBank Group's net profit continued to decline. Until November 9 last year, after the third quarter of 2021 performance was announced, its profit status began to turn into losses.
After entering 2022, SoftBank Group's losses continue to expand.Data shows that in the first quarter of this year, its net loss reached 2.1 trillion yen (approximately RMB 110.8 billion), and with the net loss in the second quarter mentioned above, the company actually lost nearly 5.3 trillion yen in just half a year.
Masayoshi Son once said, "We have been using Alibaba's stock to raise funds. Such transactions give us good cash reserves." Now, SoftBank Group's cash flow crisis has worsened, and its "life-saving grass" is not the only one of Alibaba.
The US$7 billion share exchange agreement reached with Deutsche Telecom in 2021 has also become a channel for SoftBank Group to seek cash out. Public information shows that SoftBank Group's Vision Fund not only cashed out from technology companies such as Uber and real estate trading platform Opendoor, but in March this year, Vision Fund first sold 50 million shares of Korean e-commerce giant Coupang to cash out US$1.044 billion, and then cleared shares of the autonomous driving project Cruise for US$2.1 billion to recover funds.
Regarding SoftBank Group's sale of Alibaba shares and cashing out, due to the large reduction in holdings, Chen Da felt that "the stock price pressure may be relatively high in the short term." He believes that the current market is facing a large "selling pressure", not only for SoftBank Group, but also for the other side Alibaba.
reporter learned that the data on holdings in the second quarter by British investment institution Berke Investment showed that it almost sold its Alibaba shares held by it. Just during the period when two major shareholders were exposed to share reductions, Alibaba Group issued an announcement on August 4 stating that two new independent directors would be added, sending a signal of further optimization of board diversification and corporate governance.
