Shulou(Shulou.com)11/24 Report--

Beijing, August 22 (Beijing time)-Yoshimitsu Goto, CFO of Softbank Corp. Group, said in an interview that Softbank Corp. sold a large portion of his stake in Alibaba Group "immediately" to show investors that he was financially stable after suffering a record quarterly loss of $23 billion.

On August 10 this year, Softbank Corp. announced that the company's board of directors had approved the settlement of several prepaid forward contracts he had previously entered into with counterparties of several financial institutions in advance. Softbank Corp. said that through the settlement of prepaid forward contracts, it will reduce its stake in about 242 million American depositary shares of Ali, accounting for about 9 per cent of the total number of shares issued by Ali.

Goto Fangguang admitted that after years of playing down the possibility of a sudden large-scale reduction of Alibaba shares, Softbank Corp. announced that the sale of Ali shares was very sudden. He rejected concerns that Softbank Corp. 's persistent huge losses could lead to strained relations with lenders, but admitted that the sale of Alibaba shares was to reassure investors. Softbank Corp. is one of the most leveraged companies in Japan.

"at a time like this, as an investment group, it is essential to immediately demonstrate that our financial strength is rock solid." Goto Fangguang said.

▲ Goto Fangguang

In the view of some investors, Softbank Corp. did not fully explain the sale of Alibaba shares, which made them wonder whether the move was really in response to a looming financial emergency. Just two days after Softbank Corp. reported its worst quarterly results in history, the company revealed that it would achieve a gain of 4.6 trillion yen ($33.6 billion) by selling Alibaba shares, which would significantly reduce Softbank Corp. 's investment in Alibaba. Because of his initial investment in Ali, Softbank Corp. founder Masayoshi Son became one of the world's best-known technology investors.

Goto Fangguang said that the reduction of Alibaba shares is modelled on the previous practice of Softbank Corp. selling some of his most valuable holdings. In March 2020, when the epidemic caused Softbank Corp. 's share price to plummet, the company began to reduce some valuable holdings, including Softbank Corp. 's domestic mobile business unit and US operator T-Mobile.

"just like two and a half years ago, we want to show the world that we can do this because our financial position is flexible. that's our goal."

Softbank Corp. helped boost investor confidence in 2020 by selling $41 billion in assets, financing the company's largest share buyback in Japanese history and repaying a huge debt burden. Softbank Corp. 's latest move to sell Alibaba's shares pushed the company's share price up 10 per cent, but it also baffled some analysts.

"at a time when Alibaba's share price is down 71 per cent from its peak, Softbank Corp. is reducing its exposure to its biggest asset. this is very different from the super-positive news we have been used to hearing for years." Said Kirk Boodry, an analyst at Redex Research, a research firm.

Softbank Corp. 's sale of Ali shares was done through a prepaid forward contract. Now, Softbank Corp. is increasingly using the derivatives to raise cash that can be paid immediately. Until recently, Softbank Corp. stressed to investors that these contracts do not amount to sales because it retains the option to buy back shares in the future. But Softbank Corp. decided to settle the contracts ahead of time, giving up the option to retain the shares, meaning Softbank Corp. 's stake in Ali would fall to 14.6 per cent from 23.7 per cent at the end of June.

After Softbank Corp. suffered two consecutive quarters of huge losses, a number of investors and analysts expressed concern that Softbank Corp. might break a financial contract with lenders. According to the contract, Softbank Corp. is not allowed to report losses for two consecutive years. Softbank Corp. made a net loss of 1.7 trillion yen in the year to March 2022.

"our decision has nothing to do with financial contracts. We have countless ways to solve the problem of contracts." Goto Fangguang said.

He added that the main reason for the early settlement of Ali's forward contract was to allay concerns that the group needed additional cash to buy back shares in the future. "We want to send a clear message about our balance sheet." He said.

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