Reporter of the Economic Business: Wen Qiao Reporter of the Economic Business Business: Gao Han
On August 3, local time, according to the Financial Times, SoftBank Group (SFTBY, stock price of US$20.87, market value of US$86.464 billion) has sold about one-third of its holdings Alibaba (BABA, stock price of US$95.72, market value of US$253.48 billion) through a "prepaid forward contract" this year, raising a total of US$22 billion.
SoftBank performed very poorly in fiscal 2021 and fiscal 2022, and its Vision Fund portfolio, which was based on its fame, also suffered a heavy blow. To cope with the market downturn, SoftBank began to “turn” — the company has increasingly used the aforementioned derivatives to raise cash immediately while retaining the possibility of continuing to hold shares.
Forsyth Barr Asia Ltd analyst Willer Chen said in an interview with Bloomberg that this (selling stock) method is more like a delay method, better than selling it directly in the market, because the latter "may have a certain impact on the stock price in the short term."
In May this year, SoftBank Group President Masayoshi Son promised investors, "It's time for SoftBank to take defensive measures." Deeply trapped in huge losses, SoftBank's "short money" pace of raising cash is accelerating.
Image source: Photo by Wang Jiaqi, reporter of Meike (data photo) Why did
sell "the only current asset" in advance?
According to the Financial Times, SoftBank has sold more than half of its holdings in Alibaba by prepaying the forward contract . These transactions will result in SoftBank’s significant reduction in its stake in Alibaba in the next few years, lowering its stake in Alibaba to below the threshold for retaining a board seat and not being able to consolidate revenue from Alibaba in its financial report.
It is reported that the "advanced forward contract" is a derivative, which SoftBank uses to raise cash while retaining the possibility of continuing to hold shares.
According to reports, regarding whether SoftBank will repurchase Alibaba shares in the future, SoftBank emphasized that the company will reserve the right to repurchase Alibaba shares. The company said that "selling ahead of time" Alibaba's stock could help the company "raise funds in advance", while " hedges the decline in 's stock price." SoftBank also said it had cut new investments and focused on "adding cash positions in this uncertain market environment."
20 years ago, Masayoshi Son led a round of financing of up to US$20 million for Alibaba, and also gained huge investment returns. If SoftBank chooses not to buy back Alibaba's shares, it will mark the end of an era.
According to documents released by the U.S. Securities and Exchange Commission (SEC), SoftBank’s forward sales of 213 million Alibaba shares this year were reached with banks such as Goldman Sachs , Ruisui and UBS . It is reported that in most cases, the stock will not be finalized after two years. SoftBank will retain the voting rights of its shares until its expiration date and will choose to settle the contract in cash rather than shares.
Since October last year, SoftBank has transferred 40 million shares of Alibaba shares to settle previously concluded transactions, and its shareholding in Alibaba fell from 24.8% to 23.9% in mid-July.
SoftBank has been raising funds since at least 2016 by selling derivatives related to Alibaba shares, according to Bloomberg. According to the Financial Times, the sale of Alibaba shares is also SoftBank's efforts to diversify its holdings. From 2020 to the end of March this year, SoftBank raised US$30 billion by selling Alibaba's forward assets.
According to the Financial Times estimates, judging from SoftBank’s record forward sales speed this year, the total amount of shares it sold exceeded the total of the previous three years, which means SoftBank may have used more than 80% of Alibaba shares as collateral for margin loans in derivatives trading or stock pledges. As of the end of March this year, SoftBank has pledged 164 million Alibaba shares as collateral for a US$6 billion loan.
Jefferie analyst Atul Goyal said, "Alibaba is SoftBank's only current asset, and they don't have any other large current assets."
"lack of money" SoftBank cash out methods are full of ways
In the huge losses in the 2021 fiscal year and the first quarter of fiscal year 2022, SoftBank's "lack of money" is raising cash is accelerating.
SoftBank's financial report shows that the net loss in fiscal year 2021 ended in March was about 1.7 trillion yen, and its losses amount was three "most" in history: the company's largest annual loss in 40 years of history, the largest quarterly net loss in history, and the largest loss in history since its establishment.
Redex Research analyst Kirk Budry estimates losses will continue to increase in the quarter to the end of June, causing SoftBank’s high independent debt to increase. He said SoftBank’s debt has almost doubled in the past 18 months to reach 12.1 trillion yen by the end of March, while the company’s cash position is 2.9 trillion yen.
In addition, dozens of investments from Vision Fund, which once rode the tech shareholder wind, amid the selling wave of technology stocks, have been on the rise of technology stocks. Also fell sharply. After announcing the previous fiscal year Vision Fund investment loss of $27 billion in May, Masayoshi Son promised investors that he would take defensive measures.
Before that, SoftBank had used many channels to raise funds.
In 2021, SoftBank reached a $7 billion share swap agreement with Deutsche Telecom (GR, share price 1.870 euros, market value of 93.237 billion euros) to increase the latter in T-Mobile In return, SoftBank sold about 45 million shares of T-Mobile US shares to Deutsche Telecom at an average price of $118 per share, and received a 4.5% stake in Deutsche Telecom in return. By April this year, Deutsche Telecom acquired T-Mobile from SoftBank for another $2.4 billion through call option purchases. Additional shares of US.
In March this year, SoftBank Vision Fund sold 50 million shares of Korean e-commerce giant Coupang (CPNG, stock price of US$19.23, market value of US$33.892 billion) at a discount of 40% compared with the IPO price, cashing out US$1.044 billion. In the same month, SoftBank Vision Fund sold all its holdings in Cruise, a self-driving star project, for US$2.1 billion, and recovered US$900 million in investment income.
In addition, there are reports that Masayoshi Son pledged one-third of his personal SoftBank shares to financial institutions in exchange for loans, and the pledged 153 million shares were worth approximately US$291 million.
SoftBank is not only "short money", but its executive team has undergone frequent changes in recent months. At the end of June, Michelle Combe, CEO of SoftBank Group International, an overseas subsidiary of SoftBank Group, resigned, ending his five-year career at SoftBank; in April, Son's long-standing assistant Ronald Fisher also resigned from the head of the US branch of Vision Fund; previously, former SoftBank CEO Marcelo Crower also left at the beginning of the year.
As of press time, data showed that SoftBank's stock price had fallen by more than 56% from last year's high. On August 4, Alibaba Hong Kong stock closed up more than 5%.
4 Cover image source: Reporter of Meike Photo by Wang Jiaqi (data photo)
Daily Economic News
Daily Economic News
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