With Alibaba stake cut, SoftBank's Son cools toward China tech (updated)

JD Logistics

15/08/2022 24:00

(Repeats item that first ran on Friday)
    By Sam Nussey
    TOKYO, Aug 12 (Reuters) - SoftBank Group Corp's  9984.T 
decision to sell down its Alibaba Group Holding  9988.HK 
 BABA.N  stake for a $34 billion gain may be aimed at bolstering
its finances, but it also underlines how CEO Masayoshi Son has
cooled on China tech.
    Son was formerly one of the sector's biggest cheerleaders
and Alibaba is his most famous bet, immensely profitable and for
his fans, symbolic of his foresight and investing acumen. 
    Amid a sharp market downturn, however, Son will reduce his
conglomerate's stake in Alibaba to 14.6% from 23.7% by settling
prepaid forward contracts, although the Chinese firm remains
SoftBank's largest asset.  urn:newsml:reuters.com:*:nL1N2ZM0K6
    "It seems like they're saying 'we think the outlook for
China tech is pretty poor so we're going to get in front of
that'," said Redex Research analyst Kirk Boodry. 
    A rough ride for Chinese tech companies after a regulatory
crackdown that started in late 2020 has been exacerbated by
tensions between Washington and Beijing. 
    Alibaba has been added to the U.S. Securities and Exchange
Commission's delisting watchlist as a result of a dispute over
auditing compliance issues for U.S.-listed Chinese firms. 
    Murky prospects for the Chinese economy as Beijing pursues a
zero-COVID policy that has led to stringent lockdowns have also
not helped. Since the regulatory crackdown, Alibaba's shares
have fallen by more than two thirds to value the company at $250
billion.
    "We have to watch (Chinese) government policy with caution
and not be reckless," Son told shareholders in June. 
    Son's pullback contrasts with earlier optimism towards China
tech that saw him pour $12 billion into ride-hailer Didi through
the first $100 billion Vision Fund, which also made outsized
investments in Uber  UBER.N  and office space firm WeWork
 WE.N .
    Didi angered Chinese regulators by pushing ahead with a New
York initial public offering and is now traded over-the-counter
after delisting. 
    SoftBank was forced to cut the valuation and, after a series
of high profile reversals, Son reduced the size of individual
investments made through a smaller second fund.
    As of end-June, SoftBank had booked a $9.3 billion gross
investment loss on Didi. 
    SoftBank's other Chinese bets include Full Truck Alliance
 YMM.N  and JD Logistics  2618.HK . 
    The conglomerate is also the top shareholder in AI firm
SenseTime  0020.HK , which has been blacklisted by Washington
over human rights concerns. 
    Sensetime shares fell by almost half at the expiry of a
lock-up period in late June.
    This week, SoftBank announced it had exited KE Holdings
 2423.HK , which operates Chinese property platform Beike, at an
average price per share of $23.89 compared to a cost price of
$12.91.
     The conglomerate has pledged to preserve cash and cut costs
as it booked a $50 billion loss at its Vision Fund investment
arm in the six months to end-June.  urn:newsml:reuters.com:*:nL1N2ZL0JD
    TikTok operator ByteDance is also an investment and has been
highlighted as one of eight assets in the first Vision fund with
potential upside. 
    The Beijing-headquartered company, which has received
scrutiny in the West over its management of user data, does not
currently have a timeline for its much-anticipated IPO, Reuters
reported previously.  urn:newsml:reuters.com:*:nL3N2WN21Y
    Alibaba "is the only 'representative mega-win' investment in
the portfolio for now," Quiddity Advisors analyst Travis Lundy
wrote in a note on Smartkarma. 
    Without it SoftBank is "less interesting because very little
of the portfolio now reflects any sort of "special sauce" of
forward-thinking investment," he wrote.  
    For now, however, using capital to buy SoftBank's own shares
is a priority for Son. The company has announced a 400 billion
yen ($3 billion) share buyback in addition to the current 1
trillion yen programme which is due to expire in November. 
    SoftBank shares closed up 5.6% on Friday, the first trading
day after the Alibaba deal was announced late on Wednesday. The
conglomerate's shares have gained 3.2% year to date. 
    ($1 = 133.2000 yen)

 (Reporting by Sam Nussey; editing by Edwina Gibbs)
 ((sam.nussey@tr.com;))