SoftBank expects $34 billion in earnings by cutting Alibaba stake

SoftBank said on August 10 that it plans to reduce its stake in Chinese e-commerce company Alibaba as part of a deal on financial contracts that it expects to add $34 billion to pretax income in the current quarter .

The Japanese technology investment company said its stake in Alibaba is expected to fall to 14.6% as a result of the moves. Participation was 23.7% on June 30.

He also said Alibaba is expected to no longer be an equity method company partner, which changes the way Alibaba’s profits are recorded on SoftBank’s books. SoftBank said it would continue to maintain a good relationship with Alibaba.

SoftBank has been using its assets to raise cash after suffering big losses on investments in tech startups. The company said on August 8 that it posted a loss equivalent to $23 billion in the April-June quarter, mainly as a result of investments that deteriorated.

The moves relate to contracts SoftBank has made with financial institutions in recent years under which it raises cash from its Alibaba shares. SoftBank has said it can settle the contracts later, either by paying cash or giving up control of Alibaba shares. It said the reduction in its stake is coming because it has decided to use the latter method, known as physical settlement, for up to 242 million US depositary receipts from Alibaba.

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SoftBank said it expected a contribution to pretax income of about 4.6 trillion yen, equivalent to $34 billion, as a result of the physical deal.

Alibaba at its peak accounted for more than half of SoftBank’s total assets. But after Alibaba’s share price fell sharply during China’s crackdown on its technology companies, its importance to SoftBank waned. As of June 30, the Alibaba holding represented about a fifth of SoftBank’s net asset value, SoftBank said this week.

SoftBank founder and CEO Masayoshi Son was a longtime member of Alibaba’s board, and Alibaba co-founder Jack Ma served on SoftBank’s board. They left those positions two years ago.

Write to Kosaku Narioka at

This article was published by Dow Jones Newswires, a service of the Dow Jones Group


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