SoftBank will cut its stake in e-commerce giant Alibaba to 15% from 24%. It’s a sensible, albeit belated, move, says LiamWardProud
The same focus on cash preservation seems to have informed the decisionto cut the Alibaba holding, which has a totemic significance at SoftBank as one of the world’s most lucrative tech investments. Through derivatives deals with banks, Son could have retained the Alibaba stake by settling so-called prepaid forward contracts in cash. Instead, he handed over the shares. SoftBank is dramatically reducing its position to “eliminate concerns about future cash outflows”.It's the sensible move.
The same can be said of selling down ownership of SoftBank’s eponymous Japanese mobile operator, which was worth $18 billion in June after deducting the parent company’s margin loan, and a $7 billion T-Mobile US holding. Spinning off chip designer Arm, rather than pursuing plans to list a small stake, would likewise simplify the group and lift its valuation. What’s left would be the Vision Funds, making SoftBank a way for public-market investors mainly to gain exposure to Son’s hodgepodge of private tech outfits.
It may not look so appealing under the current circumstances, but at least SoftBank would have a clear purpose. The Alibaba sale could be the first step in breaking some destructive taboos.
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Breakingviews - SoftBank’s Alibaba sale could end breakup tabooMasayoshi Son is thinking the unthinkable at SoftBank Group . His $63 billion technology and telecom empire will slash its stake in Alibaba to 15% from 24%. The long-overdue shrinkage offers a blueprint for what to do next: break up the conglomerate.
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