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By selling its Alibaba shares, SoftBank raised $22 B

According to the Financial Times, SoftBank plans to sell up a portion of its long-term stake in Alibaba in order to collect up to US $22 billion in cash over the next years.

So far this year, the Japanese company has sold approximately one-third of its interest in Alibaba. Prepaid forward contracts, a sort of derivative that gives SoftBank the option to maintain the shares while raising money, were used in these deals.

The second Vision Fund of SoftBank received some of the monies raised, but it had trouble luring other investors.

By selling more than half of its Alibaba interests so far, SoftBank may have lowered its ownership below the required level to keep its board seat at Alibaba. More than 20 years ago, SoftBank made an investment in the Chinese e-commerce start-up of the time.

Financial Times documents obtained from the US Securities and Exchange Commission show that banks including Goldman Sachs, Mizuho, and UBS were involved in the forward sales of 213 million Alibaba shares this year. The transactions added two years to the ultimate transfer of shares.

The contracts may be settled with cash instead of shares, and SoftBank keeps the voting rights on the shares until they mature. To settle the transactions, several of the arrangements include minimum or maximum share values. SoftBank said that it also held the right to repurchase the shares.

The sale is a part of SoftBank’s strategy to diversify its assets since, by 2020, Alibaba will account for 60% of its overall worth. Just 23% of the market was still represented by Alibaba at the end of March.




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