SoftBank plans to raise $41 billion by selling key holdings like Alibaba to silence doubters

30 Mar, 2020 00:33
source: Singularity Financial

Singularity Financial Hong Kong March 30, 2020 – Author: Carl

According to “Bloomberg Markets: China Open”, SoftBank is said to be planning to sell $14 billion of its shares in Alibaba. The move is part of a larger plan to shore up its business battered by the coronavirus pandemic.

The Japanese conglomerate is considering raising the remainder of the money by selling a stake in SoftBank Corp., its domestic telecommunications arm, as well as part of Sprint Corp. following its merger with T-Mobile US Inc., said one of the people, who requested anonymity discussing private transactions. The Alibaba stake sale could range from $12 billion to as much as $15 billion, the people said.

The Japanese company now aims to sell assets to raise as much as 4.5 trillion yen (US$41 billion) over the coming year to buy back stock and slash debt – an amount equivalent to almost its entire market value last week.

The scale of the endeavour surprised investors, sending the Japanese firm’s stock up 19 per cent on Monday. Yet that was a fraction of the capitalisation the investment house has lost since its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.

Masayoshi Son is eager to generate funds

Masayoshi Son, the founder of SoftBank, announced the sale plans Monday in Tokyo – he is finally doing what investors have been urging for years — using his stake in Alibaba for shareholder returns and to pay down debt. 

The Alibaba stake, worth more than US$120 billion, makes up the largest chunk of SoftBank’s unrealised value. An Alibaba spokesperson did not respond to an emailed request for comment. SoftBank spokespeople in Tokyo and the US declined to comment.

“The market sent a strong message and SoftBank has heeded it,” Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma, said after the Monday announcement.

Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.

Alibaba, Sprint and SoftBank Corp. are worth as much as $190 billion combined, estimates Atul Goyal, senior analyst at Jefferies Group. But Son will want to keep at least a 50% stake in the domestic telecom unit because it’s the only cash-generating asset and its dividends help pay for SoftBank’s interest on debt, he wrote. And since Sprint is going through a merger with T-Mobile, most of the funds will initially have to come from Alibaba, he said.