Alibaba shares are falling due to the report of selling a stake in Soft Bank

TOKYO (Reuters) – Japanese technology investor SoftBank Inc. (9984.T) has moved to sell its remaining stake in Alibaba Group Holding Ltd. (9988.HK), the Financial Times reported. Shares of a major company fell.

The sale will come as the valuations of major Chinese tech companies have begun to recover this year after the end of two years of intense regulatory scrutiny, offering a window for longtime investors like SoftBank to reduce exposure to an economy battered by tough pandemic policies and tensions between China and the United States.

SoftBank’s share price changed little on Thursday, tracking the broader market (.N225). Alibaba, one of the most valuable assets in SoftBank’s portfolio, fell as much as 5.2% in Hong Kong after the report before narrowing the loss to 2.8%.

It followed a 5.2% drop on Wednesday for Tencent Holdings Ltd (0700.HK) after the social media giant’s largest shareholder, Dutch Prosus NV (PRX.AS), said it might sell more of its shares, underscoring selling pressure on Chinese technology names.

SoftBank has been looking for ways to monetize its stake in Alibaba, which the Japanese conglomerate bought more than two decades ago with just $20 million spent.

“They (SoftBank) have made it clear that they need to monetize their profitable holdings,” said John Withar, head of positions for Asia at Pictet Asset Management.

“Some may have expected that they might slow down the pace of their selling at (Alibaba) now that their Arm IPO is nearing completion, but in the end everything they do falls within the realm of what they’ve said to the market.”

SoftBank aims to list British chip designer Arm this year in an initial public offering (IPO) that would raise at least $8 billion, people familiar with the deal told Reuters last month.

On Wednesday, the Financial Times He said Forward sales based on filings with the US Securities and Exchange Commission showed that SoftBank’s stake in Alibaba would eventually drop to 3.8% from about 15%.

The newspaper said that the Japanese group, led by billionaire founder Masayoshi Son, sold about $7.2 billion worth of Alibaba shares this year through paid forward contracts.

SoftBank said the deals reflected a shift to “defensive mode” to address the uncertain business environment and that it would provide details in announcing its quarterly earnings results in May, the British newspaper reported.

Neither SoftBank nor Alibaba responded to Reuters requests for comment. US-listed Alibaba shares fell 1.3 percent in after-market trading on Wednesday.

“China’s regulatory environment in the internet sector has become significantly tougher in recent years, and this is SoftBank simply responding to the changing environment, as it has already been doing,” said Shinji Moriuki, an analyst at SBI Securities. “It is within the scope of expectations that the proportion of Chinese stocks among their total investments will shrink further.”

SoftBank gained $34 billion last year by reducing its stake in Alibaba to 14.6% from 23.7%, as the company sought to boost cash reserves amid huge losses incurred by its Vision Fund.

The Vision Fund, which upended the tech world with big bets on startups, posted a staggering 8 trillion yen ($60 billion) loss in calendar 2022 as market turmoil lowered the valuations of portfolio companies, prompting SoftBank to raise funds.

At that time, I also used prepaid futures contracts – a type of derivative contract that allows investors to hedge risk.

Alibaba has lost more than two-thirds of its value from the highs it touched in late 2020, hit by mounting regulatory action in the technology sector that included a hefty fine on Alibaba and scrutiny of founder Jack Ma’s business empire.

($1 = 133.1900 yen)

Additional reporting by Yuvraj Malik in Bengaluru, Ankur Banerjee in Singapore and Kiyoshi Takenaka in Tokyo; Editing by Krishna Chandra, Elory and Christopher Cushing

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