* To cut stake in Chinese tech firm to 14.6% from 23.7%
* Says move will boost defences against market downturn
* Booked $50 bln loss at Vision Fund unit in first half
TOKYO, Aug 10 (Reuters) - SoftBank Group Corp said
on Wednesday it would book a gain of $34.1 billion by cutting
its stake in Alibaba Group Holding, as the investment
behemoth looks to shore up its cash reserve to weather the
The Japanese company will reduce its stake in Alibaba to
14.6% from 23.7% by settling prepaid forward contracts.
Alibaba's U.S.-listed shares were down 1.3% in early trade.
SoftBank booked a $50 billion loss at its Vision Fund
investment arm in the first half of the year as its tech bets
soured, with Chief Executive Masayoshi Son on Monday pledging to
further reduce investment activity and cut costs.
By settling the Alibaba share contracts, SoftBank "will be
able to eliminate concerns about future cash outflows, and
furthermore, reduce costs associated with these prepaid forward
contracts," it said in a filing.
"These will further strengthen our defence against the
severe market environment."
The estimated total gain of 4.6 trillion yen ($34.1 billion)
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, the filing showed.
Son bought into Alibaba for $20 million in 2000 and the
Chinese firm's growth to become one of the world's biggest
e-commerce companies helped burnish his tech investor
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 that included a hefty fine on Alibaba and scrutiny of
founder Jack Ma's business empire.
The settled prepaid forward contracts correspond to a
maximum of about 242 million American depositary shares of
Alibaba, or roughly 9% of the Chinese company's total
"At first glance, this may be somewhat supportive (for
Alibaba shares) because of substantially reduced fears of future
overhang, but it is not an unmitigated positive," said Quiddity
Advisors analyst Travis Lundy, who publishes on Smartkarma.
"The largest holder sold nearly half their stake and some
may take meaning from that."
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 monetisation, SoftBank
said, adding it would "continue to maintain a good relationship
"It is a mixed situation for Alibaba investors, if you were
a long-term investor who believes in the future of the company,
it is ok. However, there will be some incremental near-term
selling pressure at this point," said Bo Pei, analyst at US
Ties between the two companies have weakened in recent
years, 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 ride-hailer Didi Global, has sought to emphasise the
decreasing relative size of China tech in his portfolio after
valuations were hit by regulatory action and increased
($1 = 134.9700 yen)
(Reporting by Sam Nussey in Tokyo Additional reporting by Scott
Murdoch in Hong Kong, Josh Horwitz in Shanghai and Akash Sriram
Editing by Barbara Lewis and Mark Potter)