BABA stock is down more than 3.5% this morning after Japanese tech and telecom conglomerate SoftBank Group (SFTBY) announced it is reducing its stake in the Chinese e-commerce giant to 28% from 32.3%. SoftBank said it was unloading at least $7.9 billion from its Alibaba Group (BABA) stake to reduce debt.
The planned sale, expected to be completed in the coming weeks, will allow Softbank to sell $2 billion of its ordinary shares directly to Alibaba and $5 billion in securities in a way that these convert into Alibaba’s ADR to institutional investors through a private placement. Softbank will sell a further $500 million to “a major sovereign wealth fund,” and $400 million to members of Alibaba Partnership group, which includes chairman Jack Ma.
Softbank said the sale was “driven purely by capital structure and de-leveraging objectives”. It also noted that the transaction will improve its financial standing after a push into the U.S. wireless market.
In a statement Softbank’s founder and CEO Masayoshi Son said the partnership between the two companies will continue.
“This investment has been phenomenally successful, [Masayoshi invested $20 million in FY 2000 in up and coming Alibaba. That stake is now worth about $65 billion] and over the past 16 years, we have built a close relationship, working together on many exciting projects. In that time, we have not sold any Alibaba shares,” he said.
In a separate statement, Jack Ma said: “As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to re-invest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders.”
Both Alibaba and SoftBank said their founders will remain on the board of their respective companies.