By
Tolu Ajiboye
February 9th, 2024
While Alibaba still maintains its dominance in most of the industries it is invested in, earlier the company unveiled plans to split itself into 6 functional units.
The shares of Chinese multinational e-commerce and tech conglomerate, Alibaba Group Holding Ltd (HKG: 9988) slipped in the early trading hours on Thursday after a selloff from SoftBank Group Corp (TYO: 9984) in what appears as a vote of no confidence. As reported by CNBC drawing on regulatory filings by the Financial Times, as much as $7.2 billion worth of shares were sold by the Japanese giant.
The selloff was conducted through the Vision II Fund and it shows a more direct leaning to the conservative approach that founder and Chief Executive Officer, Masayoshi Son said the company will embrace following its streak of losses. SoftBank’s decision to offload the shares might not necessarily be a vote of no confidence, as it may be pivoting into an industry that appears more stable than the now uncertain tech sector.
SoftBank was one of the early backers of Alibaba. As far back as 2000, Son invested the sum of $20 million into the budding company and helped transform it into one of the most successful businesses in modern history. Over the years, Alibaba has grown through the ranks and now maintains a spot as one of the most dominant ecommerce businesses in China and around the world
Over the course of the years, the company pivoted into different sectors ranging from payment to the cloud business. All of its entities were successful and helped return great fortune to SoftBank. The investment of the Japanese giant helped raise the company’s stake in Alibaba to 25% at a time. The total stake was worth the sum of $100 billion, however, sliding valuations over the past few years have hampered growth.
Following the cut, Alibaba shared trading in Hong Kong closed Wednesday’s session down 2.81% to close at 93.35 Hong Kong Dollars. In New York, the e-commerce giant’s shares are down by 1.11% in the Pre-Market.
Alibaba Shares Sell-Off by Softbank, Other Motivations
While selling off of a mature stock portfolio cannot be ruled out for venture capital companies, downsizing its most valuable portfolio might be stirred by a more specific reason.
While Alibaba still maintains its dominance in most of the industries it is invested in, the company unveiled plans as reported earlier by Coinspeaker to split itself into 6 functional units. These units will operate independently, pursue their own funding and be free to go public over the long term.
While each unit is notably operating as a standalone at the moment, SoftBank might have lost confidence in the plans based on the growing competition in the Chinese tech sector as well as the intense regulatory landscape.
SoftBank still maintains a 3.8% stake in the parent company and both Alibaba founder, Jack Ma and Son have exited their positions in each other’s board a while ago.