SoftBank Group’s historic divestment from Alibaba marks the end of an era

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Japan’s SoftBank Group has made headlines with its recent announcement of a significant divestment from e-commerce giant Alibaba Group Holding, marking the conclusion of one of the most successful deals in China’s internet industry. This move comes after a partnership that spanned about 23 years, during which SoftBank played a pivotal role in Alibaba’s growth and success.

SoftBank’s journey with Alibaba began in 2000 when it invested US$20 million in the then-startup. This initial investment has now translated into a remarkable gain of US$8.5 billion for SoftBank’s 2024 financial year, representing an astonishing 425-fold increase in value. The divestment was executed through a subsidiary, Skybridge, which sold 512.3 million Alibaba shares via a prepaid forward contract with financial institutions between October 2021 and January 2024. This transaction accounted for approximately a fifth of Alibaba’s total outstanding shares and nearly all of SoftBank’s stake in the company.

As a result of this divestment, Alibaba’s co-founders, Jack Ma and Joe Tsai, have emerged as the largest shareholders of the company. This significant shift in ownership has raised hopes for Alibaba’s future growth trajectory. Ma, who retired as Alibaba’s executive chairman in 2019, has increased his stake in the company, while Tsai, who took over as chairman last year, has also shown confidence in Alibaba’s prospects by acquiring additional shares.

SoftBank’s role in Alibaba’s journey has been instrumental in fostering the growth of China’s tech industry and boosting the country’s economic development. This partnership not only provided Alibaba with crucial funding but also paved the way for a new generation of Chinese entrepreneurs to access international capital, contributing to the expansion of the country’s tech ecosystem.

However, SoftBank’s recent financial performance has been challenging, with the company reporting its fourth consecutive quarter in the red, primarily due to the impact of the WeWork bankruptcy filing. This has prompted SoftBank to strategically realign its investment portfolio, including divesting from other companies like the Indian fintech firm Paytm and Hong Kong-listed artificial intelligence giant SenseTime.

Looking ahead, SoftBank has indicated that it has no plans to buy or sell any new Alibaba shares in the future. This decision marks the end of an era for SoftBank’s involvement with Alibaba, signaling a new chapter for both companies as they navigate the evolving landscape of the global tech industry.

(Source: SCMP | The Edge Singapore | Yicai Global)

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