This is a page that is turning in the Asian digital sector. SoftBank, a partner since the early 2000s of Alibaba, announced on August 10 that it would sell a large part of its shares by the end of September. The Japanese conglomerate, in a complicated position with $23.4 billion in losses in the second half of 2022, hopes to recover $34 billion in the operation.
The pre-breakup liabilities of SoftBank and Alibaba
In a turbulent time for Tech in general and SoftBank in particular, recovering cash is always welcome. This is the explanation given by the group to reduce its stake in Alibaba from 23.7% on June 30 to 14.6% at the end of September.
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The company said it ” would further strengthen its defense against the harsh market environment “in order to eliminate” concerns about future cash outflows “.
In fact, SoftBank has been gradually reducing its stake in the Chinese company for a few years. Geopolitical tensions between the United States, a great ally of Japan, and China have played a role. Most important remains Beijing’s fierce crackdown on its digital sector for almost two years.
Alibaba was emblematic of this policy, receiving a historically high antitrust fine of 2.3 billion euros in April 2020. Jack Ma, the company’s charismatic boss, who served on the board of directors of SoftBank, has disappeared for several weeks at the same time. Alibaba’s capitalization fell from 850 billion dollars in October 2020 to 240 billion dollars on August 9, recalls the Wall Street Journal.
A motivation largely sufficient for SoftBank to move away from the group. Nevertheless, the operation presented on August 10 is a small earthquake for Asian digital. The partnership between SoftBank and Alibaba, established in the early 2000s with an investment of $20 million, symbolized the emergence of a major tech group in China.
The end of an era
When Jack Ma sat on the board of directors of SoftBank, Masayoshi Son, CEO of the latter was on that of Alibaba. For a period, 60% of the Japanese conglomerate’s assets were with the e-commerce giant. As of June 30, 2022, it still represented a fifth of their value. In 2014, when Alibaba went public in the United States, SoftBank owned more than 32% of the company.
With this brutal reduction of its participation, the group warned that it would have to change its accounts. The relationship with Alibaba was so close that SoftBank recognized part of the profits as its own. Now the Chinese giant will be reduced to the status of an investment like any other. If SoftBank assured that it ” would keep good relationship with Alibaba », it is about the end of an era.
SoftBank had warned, on August 8, when publishing its disappointing results, that its defenses would be “ reinforced “. Despite its difficulties, it has solid liquidity, enough to repay its debts over the next two years. By spending it by buying back its own SoftBank shares, it limits the damage to its stock price. Shares in Alibaba, valued at $22 billion, could eventually earn the group $34 billion. A beautiful woolen sock to prepare for the coming winter.