Despite pressure from aggressive investors, SoftBank CEO Sun Justice has rejected a $150 billion sale of Alibaba shares. On February 12th Reuters reported that Elliott Management, the US activist investment firm, had become a shareholder in Japan’s SoftBank Group and was beginning to pay renewed attention to its 26 per cent stake in Alibaba.
(Original title: Sun just rejected the offer to sell Alibaba shares, think there is still a lot of room for growth)
Journalist Cheng Tianmeng Comprehensive Report
Alibaba is SoftBank’s biggest asset to date and Sun’s most successful bet on technology companies to date.
Elliott, one of the world’s leading activist investors, has accumulated about $3 billion in SoftBank shares and has asked to buy back up to $20 billion worth of shares. But Mr Sun said he was in no hurry to sell Alibaba’s shares, raising questions about how SoftBank would raise money for a potential buyback.
“I think Alibaba still has a lot of room to grow, and I’m not in a hurry to sell their stock. Sun said at a press conference held on February 12.
As of the close of trading on February 12, Alibaba had a market capitalisation of $601.8billion, and SoftBank’s stake in Alibaba was worth about $150 billion, surpassing SoftBank’s own market capitalisation of $110 billion.
SoftBank’s recent financial performance has been poor.
The Wall Street Journal reported on February 12 that it reported that operating profit fell 99 percent to 2.6 billion yen ($23.6 million) in the quarter ended December 31, 2019. SoftBank’s profit slump was largely due to the continued weakness of the Vision Fund.
Softview has stopped investing in new projects in 2019 after burning $80 billion in two years, and SoftBank has struggled to cope with a series of high-profile missteps in the Vision Fund. Shares in Uber, the online car giant, one of the fund’s biggest investments, have hit the Vision Fund hard, while the parent company of Wework, the US co-op platform, has lost billions of dollars.
In response, SoftBank said the company would improve after the quarter ended, Uber’s share price rose again, and this week a U.S. federal court approved the long-delayed merger of t-Mobile and Sprint, the two operators, with SoftBank owning 84 percent of Sprint. Sprint’s shares jumped 70 percent after the merger was approved on February 11. SoftBank’s shares were also up 12 per cent on the Tokyo Stock Exchange on February 12.
Wednesday’s press conference did little to allay investorconcerns about SoftBank’s business strategy.
SoftBank is highly leveraged, Reuters reported. Sun is trying to attract outside money into his second Vision Fund 2. Analysts said Mr Sun’s reluctance to sell his stake in Alibaba made it almost impossible for Elliott to buy back to the scale he wanted.
“From a shareholder’s point of view, you should sell it and invest in something that pays off,” Said Boodry, an analyst at Redex Holdings, wrote on research platform Smartkarma. If SoftBank doesn’t think its return on investment can outpace Alibaba’s, it seems odd in the venture capital business. “
“These results confirm our concern that most of the rest of softbank’s actions outside Alibaba have led to fragmentation or destruction of value,” Jefferies analyst Atul Goyal wrote in a note. “