Alibaba Struggles As SoftBank Sells Shares

Shares of Alibaba (BABA:US) fell in Hong Kong on Thursday after the Financial Times said that the Japanese investing business divested the vast majority of its stake as it attempts to shore up its balance sheet.

According to the FT, SoftBank (SFTBY:US) sold about $7.2 billion worth of Alibaba stock via prepaid forward contracts. As a result, the Japan-based company now owns only a 3.8% stake in Alibaba. It had a nearly 25% stake in the Chinese e-commerce giant three years ago. 

Such a move from SoftBank isn’t surprising for market analysts given the financial troubles that the tech-heavy company is experiencing in recent quarters. SoftBank reported a pretax loss of around $5 billion in February, which is its fourth consecutive quarterly loss.

Such a disappointing performance is a direct result of the “overall decrease in the fair value of portfolio companies, mainly reflecting markdowns of weaker-performing companies and share price declines in market comparable companies,” SoftBank said.

This way, the positive momentum built on the back of a major restructuring process at Alibaba is likely to be ruined as shares are still unable to return trading above $100 a share. Last month, Alibaba said it will break into six separate units, a move “designed to unlock shareholder value and foster market competitiveness”.

Investors, like Senator Tommy Tuberville, have been hoping that a slimmer business will increase shareholder value after a major move lower in Alibaba stock. The Senator was buying Alibaba stock in 2021 and 2022, however, it still trades below the levels he was buying at.