By Geoffrey Smith
The Japanese venture capital company has used prepaid forward sales to raise around $22 billion in cash, scrambling to shore up a balance sheet under pressure from massive writedowns on its long-term bets on technology companies. The company's flagship Vision Fund posted a $27 billion loss in the first quarter, prompting founder and CEO Masayoshi Son to promise to "play defense" for the time being.
The FT said the contracts - which cover 213 million shares this year alone - will see Softbank's stake in Alibaba fall below the threshold at which it can keep its board seat and consolidate its earnings. The contracts include clauses which give Softbank an option on repurchasing them in the future. If Softbank doesn't exercise that option, then its counterparties, which include Goldman Sachs (NYSE: GS ), Mizuho (TYO: 8411 ), and UBS (NYSE: UBS ), could be left sitting on large blocks of stock which they could dump on the market.
Softbank's bet on Alibaba at its birth had made Son the richest man in Japan during the last decade. However, he has lost that crown as the value of Alibaba's stock has fallen in response to growing regulatory pressure from Beijing on China's Internet giants.
Ongoing disputes between the U.S. and Chinese securities regulators, which threaten the delisting of Alibaba and other Chinese companies from U.S. exchanges, have also weighed on Alibaba's stock price, which has fallen by more than two-thirds from its 2020 peak and is now only 40% above the price at which it listed in New York eight years ago.
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