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Through its $100 billion Vision Fund, SoftBank bought nearly $4 billion in shares of Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Netflix (NASDAQ: NFLX). Moreover, SoftBank purchased a stake in Tesla (NASDAQ: TSLA).
In the past few months, tech stocks have seen a rally that led to a sharp pullback on Thursday and Friday. There has been an aggressive shift in the options market that provoked hot discussions and speculations on who was standing behind the runup. The curiosity of the community was indulged by the Financial Times that revealed the name of the secret investor. It was the Japanese conglomerate SoftBank Group (TYO: 9984). Derivatives-focused U.S. hedge fund manager said that they had been investing billions of dollars in individual stock options in tech giants. Called “Nasdaq whale”, SoftBank fueled the largest ever trading volumes in contracts linked to individual companies.
“These are some of the biggest trades I’ve seen in 20 years of doing this. The flow is huge”.
According to those familiar with the matter, through its $100 billion Vision Fund, SoftBank bought nearly $4 billion in shares of Amazon.com Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Netflix Inc (NASDAQ: NFLX). Besides, SoftBank purchased a stake in Tesla Inc (NASDAQ: TSLA).
Peter Boockvar, chief investment officer at Bleakley Advisory Group, commented:
“It’s just a trip to the casino. If they’re supposed to be an investment company taking a long-term horizon, then trying to juice your short-term return through options, you’ve turned into a hedge fund. We’ll see if they’re reversing it. A lot of the call buying was an upward lift to the market. The sellers of those calls then had to buy stocks and hedge and it becomes a self-fulfilling prophecy on the upside”.
Over the past two weeks, the overall nominal value of calls traded on individual US stocks averaged $335 billion a day. However, on Thursday the markets slowed down, with Tesla falling 9%, and Amazon and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) dropping 5%.
SoftBank declined to comment.
Previously, such moves worked well for SoftBank or Nasdaq whale. However, the giant has seen some reverses in startup investing lately. For example, its big bet on WeWork ended up from a valuation of $70 billion to $3 billion in a year. Uber Technologies Inc (NYSE: UBER) stock let SoftBank down as well as it hasn’t lived up to its IPO expectations. Besides, coronavirus lockdowns have blown away big bets like Oyo Rooms that cut operations and laid off people to remain afloat.
If the markets recover this week, SoftBank will gain the upper hand. But if the downturn lasts long, it may face serious challenges.
Following the Financial Times report, shares of Softbank fell more than 3% on Friday and ended 1.41% down, at $58.77. Year-to-date, SoftBank stock is 35.92% up. But in comparison with September of last year, it is now down 4%.