Alibaba Declines As SoftBank Plans To Sell $7.9 Billion Stock

Shares of Alibaba fell 3.80% to $78.80 in pre-market trading Wednesday as its largest shareholder unveiled plans to sell part of its stake in the Chinese online retailer. Japan’s SoftBank said Tuesday that it would sell at least $7.9 billion worth of Alibaba shares to help cut down its debt burden. SoftBank is still struggling to revive Sprint, which it acquired three years ago.

Alibaba Declines As SoftBank Plans To Sell $7.9 Billion Stock
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Alibaba, SoftBank to maintain their strong ties

It’s the first time SoftBank is selling its shares in the Hangzhou-based company since it invested $20 million in Jack Ma’s tiny startup 16 years ago. The sale will reduce SoftBank’s stake in the e-commerce behemoth from the current 32.2% to 28%. Mitsubishi UFJ Morgan Stanley analyst Hideaki Tanaka said the move will be positive for SoftBank. According to Reuters, the Japanese technology and telecom conglomerate had an interest-bearing debt of $107 billion, including that of Sprint.

The two companies said in a statement that they would maintain their strategic partnership. SoftBank founder Masayoshi Son will retain his board seat at Alibaba while Jack Ma will remain on the board of SoftBank. The planned sale includes $5 billion to $6 billion in a private placement to institutional investors, $2 billion stock to Alibaba, $500 million to an unnamed sovereign wealth fund, and another $400 million to the Alibaba Partnership, which is a group of the Chinese company’s founders and top executives.

Is Supercell next?

SoftBank is also reportedly planning to sell its stake in Finnish mobile game developer Supercell, the maker of Clash of Clans. The Supercell stake sale could help the Japanese firm pocket about $4 billion. SoftBank has made a variety of investments ranging from Yahoo! Japan to Sprint to Indian ride-sharing firm Ola. The company seems to be taking a disciplined approach to reducing its debt burden.

SoftBank’s announcement comes just a few days after the Hangzhou-based company revealed that the US Securities & Exchange Commission (SEC) had launched a probe in its accounting practices. Alibaba and SoftBank have strong relationships. Last month, the two companies formed a cloud computing joint venture in Japan.