Daily Management Review

Alibaba Share Sale To Give 1.2 Trillion Yen Profit To Softbank Group


Alibaba Share Sale To Give 1.2 Trillion Yen Profit To Softbank Group
Sale of its share that it held in the Chinese tech giant’s parent company Alibaba Group Holding Ltd by Japan's SoftBank Group Corp would potentially yield about 1.2 trillion yen or $11.12 billion in pre-tax profit, the Japanese company said in a on Monday.
The revenues generated from the sale dates back to 2016 when SoftBank sold a part of its stock in Chinese e-commerce giant Alibaba through derivatives in order to generate funds for the acquisition of the British chip designer ARM.
After the sale of the share in Alibaba, SoftBank has a total of about 26 per cent share in Alibaba which it worth a total of $101 billion. The profits made in the transaction would be booked for the financial quarter ending June, said the Japanese investment firm.
The shares in Alibaba were bought in 2000 by SoftBank Group founder and Chief Executive Masayoshi Son for just $20 million and hence the Japanese investment firm is reaping huge benefits from the investment just two decades later.
Apart from the profits made from the investment, the justification of the investments made by SoftBank in tech companies over the years is also provided by the stupendous growth of the Chinese startup into one of the world's largest e-commerce companies of world.
The huge profits made by the investment in Alibaba come at a time when another of the bet on a tech company made by Son – the United States based ride hailing company Uber Technologies Inc has not been able to record the performance that investors had been expecting from it and has not been able to hold up to its expectations at the stock market since the launch of its initial public offering earlier last month.
In the financial quarter ended March, just ahead of the public listing debut, SoftBank booked a 418 billion yen profit on its Uber stake. Uber's shares closed 9% below their IPO price at $41 on Monday.
Son claimed that the share value of the SoftBank Group were undervalued arguing on the basis of the high value of the stake that the company still has in Alibaba. Since April this year when SoftBank Group’s shares reached a high, there has been a 23 per cent fall in its prices after the disappointing public listing and share price performance of Uber and the closing of a 600 billion yen stock-buyback program.
And just before the Alibaba sale announcement, shares of the SoftBank Group closed down 3 per cent on Tuesday which put the market capitalization of the company at 10.2 trillion yen.
There were reports last week quoting sources New York-listed Alibaba is planning to hold a second IPO at the Hong Kong stock exchange to generate as much as $20 billion in capital for boosting its investment war chest.