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Japanese holding company SoftBank sees its shares slide after a drop in the value of its portfolio companies.
The shares of SoftBank (TYO: 9984), a Japanese multinational conglomerate holding company, slid by over 8% on Monday, making it the seventh consecutive day of losses for the company. This came about as a result of problems piled up at two of SoftBank’s portfolio firms – Alibaba Group Holding Ltd (HKG: 9988) and Didi Chuxing (NYSE: DIDI).
SoftBank’s share price dropped from 5201 yen ($46) to 5103 yen on the Tokyo stock market even as its business model has come under renewed scrutiny. The tech giant’s share price plummeted to 5,062 yen at one point – its lowest level since June last year. SoftBank’s sustained share price drop is only part of a broader sell-off of tech stock across Asia. In addition, it also underscores the prevailing uncertainty surrounding some of the firm’s most prominent bets.
Softbank Shares Affected by Alibaba Group Going through Trying Times
Alibaba Group, a Chinese multinational e-commerce group similar to Amazon in the US, fell by more than 8%. The company, which represents SoftBank’s most valuable investment choice, had earlier stated plans for two new units. The addition is planned to accommodate Alibaba’s primary e-commerce business. This will also spread to its international digital and China digital commerce arms too. Currently, the e-commerce giant wants to facilitate growth and flexibility. It also has a larger plan to change the person handling its financial affairs. Alibaba announced that beginning in April next year, current deputy chief financial officer Toby Xu will become the new chief financial officer. The company is currently weathering a series of challenges including growing competition, a lagging economy, and a government crackdown.
Ride-hailing firm Didi Chuxing announced last week that it would delist from the New York Stock Exchange. This is happening less than six months after the Chinese firm sold its initial public offering (IPO). Furthermore, Didi says it now intends to relist on the Hong Kong Stock Exchange instead, where tech companies can also benefit from high valuations. However, SoftBank’s investors are now used to seeing the Japanese firm apply the floating shares business model for sale in the US. This is because it is where the highest achievable valuations for its portfolio companies are possible. Didi’s shares closed at $7.80 last week Friday, representing a staggering 57% drawdown since its June 30th IPO.
Another stumbling block that looms for SoftBank is the increasingly unlikely sale of its chip designer Arm to leading graphics designing company Nvidia (NASDAQ: NVDA). This is predominantly because of increased global regulatory scrutiny which does not seem to favor the deal. SoftBank initially settled on offloading Arm for about $40 billion. However, the value of the deal has now more than doubled – shooting up to $74 billion after Nvidia’s shares surged. As a result of this, SoftBank could potentially miss out on a huge payday if the deal falls through.