TOKYO: SoftBank Group Corp. on Wednesday said it will book an estimated gain of 4.6 trillion yen ($34.08 billion) on settling prepaid forward contracts using shares in Alibaba Group Holding, reducing its stake to 14.6 percent from 23.7 percent.
SoftBank on Monday booked a record quarterly net loss due to sliding valuations at its Vision Fund investment arm, with Chief Executive Masayoshi Son pledging to further reduce investment activity and cut costs.
The estimated gain announced on Wednesday includes 2.4 trillion yen from the revaluation of shares in the Chinese e-commerce giant and a derivative gain of 0.7 trillion yen, SoftBank said in a filing.
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 defense against the severe market environment,” SoftBank added.
Son bought into Alibaba for $20 million in 2000 and the Chinese company’s growth that made it one of the world’s biggest e-commerce companies helped to burnish his tech investor credentials.
But Alibaba has lost more than two thirds of its value from highs in late 2020, hit by Beijing’s crackdown on the tech sector and its scrutiny of founder Jack Ma.
The SoftBank 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 monetization, SoftBank said.
Ties between the two companies have weakened, with Ma leaving SoftBank’s board in 2020 and Son stepping down from Alibaba’s board the same year.
The Japanese billionaire, who has also bet on ventures such as ridehailer Didi Global, has sought to emphasize the decreasing size of China tech in his portfolio as market turmoil has hit valuations and US-China tensions have increased.