SoftBank Group Corp will slash its holdings of Alibaba Group Holding shares, securing a profit of 4.6 trillion yen ($34.08 billion) as it seeks to shore up its finances amid a series of recent setbacks.
The predicted gain includes $18 billion dollars from the revaluation of Alibaba shares and a derivative gain of $5.2 billion, reducing Softbank’s stake in the Chinese e-commerce firm to 14.65 from 23.7%. The Japanese company is settling prepaid forward contracts, it said on Wednesday.
The transaction “will be able to eliminate concerns about future cash outflows, and furthermore, reduce costs associated with these prepaid forward contracts,” SoftBank said. “These will further strengthen our defence against the severe market environment,” SoftBank added.
Softbank Suffers Losses
Softbank recorded a loss of $23.1 billion in its flagship investing arm Vision Fund in the April-June quarter as the value of its tech portfolio plunged.
On Monday, CEO Masayoshi Son acknowledged the company had invested in more startups than it should have at a time when valuations were “in a bubble.“ He added that “the world is in great confusion,” and pledged to further rein in investment activity and cut costs.
Vision Fund has since exited companies including Uber Technologies and home-selling platform Opendoor Technologies as it strives to raise cash.
The Alibaba transaction is not expected to result in additional sales of Alibaba shares on the market as the shares were hedged at the time of the original monetisation, SoftBank said.
- Reuters, with additional editing from Alfie Habershon
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