SoftBank raises $22b through sale of Alibaba stake

SoftBank raised up to US$22 billion in cash as part of a sell-off of its long-time investment in Alibaba over the next several years, the Financial Times reported.

The Japanese firm has sold about one-third of its stake in Alibaba so far this year. The transactions were through prepaid forward contracts — a type of derivative that enables SoftBank to raise cash immediately while having the option to keep the shares.

A portion of the funds raised was put to SoftBank’s second Vision Fund, which struggled to attract outside investors.

SoftBank has so far sold more than half its Alibaba holdings this way, potentially lowering its stake below the threshold for retaining its seat on Alibaba’s board. SoftBank had invested in the then Chinese ecommerce upstart more than two decades ago.

According to filings to the US Securities and Exchange Commission seen by the Financial Times, the forward sales of 213 million Alibaba shares this year were struck with banks such as Goldman Sachs, Mizuho, and UBS. The deals delayed the final handover of shares for two years.

SoftBank retains the shares’ voting rights until maturity and has the option to settle the contracts with cash instead of shares. Some of the deals set minimum or maximum share prices to settle the transactions. SoftBank stated it retained the right to buy back the shares, too.

The sell down is part of SoftBank’s effort to diversify its holdings, as Alibaba represented 60% of its total value in 2020. At the end of March, Alibaba now represented just 23%.

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