Softbank is a Japanese multinational conglomerate holding company that has made significant investments in Alibaba Group. Alibaba is a Chinese multinational technology company specializing in e-commerce, retail, and technology. Nearly 80% of Nigerian elite have at one time or the other interacted with Alibaba software. Softbank’s moves have had various implications on Alibaba’s share, which are discussed below.
In 2000, Softbank invested $20 million in Alibaba, which was a small startup at the time. This investment was one of the best decisions made by Softbank as it later reaped huge returns. Softbank’s investment provided Alibaba with the capital it needed to expand and grow, and in return, Softbank received a substantial stake in Alibaba and Softbank has at one time described Alibaba investment as the best investment made so far.
In 2016, Softbank sold $10 billion worth of Alibaba shares to reduce its debt. This move had a short-term negative impact on Alibaba’s stock price as the market perceived the sale as Softbank losing confidence in Alibaba’s future prospects. As a result, Alibaba’s stock price dropped by over 6%. However, Softbank’s sale was not a reflection of Alibaba’s performance but rather a strategic move to reduce its debt. Alibaba’s management also reassured investors that the sale would not impact the company’s operations, and the company’s strong fundamentals would continue to support its growth.
In 2017, Softbank’s Vision Fund made a $5 billion investment in Alibaba. This investment was seen as a positive move for Alibaba as it provided the company with more capital to invest in its business operations and expand its reach. The investment also helped Softbank diversify its portfolio as it sought to invest in high-growth technology companies. The move was seen as a long-term strategic investment that would benefit both Softbank and Alibaba.
In 2020, Softbank announced that it would sell Arm Holdings, a British semiconductor and software design company, to Nvidia for $40 billion. This move had a positive impact on Alibaba’s share price as Softbank announced that it would use the proceeds from the sale to buy back its own shares and reduce its debt. The market reacted positively to the news, and Alibaba’s stock price increased by over 3% in a single day. The sale of Arm Holdings was seen as a positive move for Softbank as it would enable the company to focus on its core businesses and reduce its debt, which would help support its long-term growth.
In 2021, Softbank reported that it had incurred losses due to the collapse of Archegos Capital Management, a US-based hedge fund. Softbank was one of the biggest investors in the fund and had exposure to several companies, including Alibaba.
The news of Softbank’s losses had a short-term negative impact on Alibaba’s stock price as investors feared that Softbank might sell its Alibaba shares to cover its losses. However, Softbank’s management reassured investors that the company’s exposure to Archegos was minimal, and the losses would not impact its long-term growth prospects.
Overall, Softbank’s moves have had mixed implications on Alibaba’s share price. Softbank’s initial investment and Vision Fund investment were positive moves that provided Alibaba with the capital it needed to grow and expand. Softbank’s sale of shares had a short-term negative impact on Alibaba’s stock price, but the company’s strong fundamentals ensured that the impact was minimal. Softbank’s sale of Arm Holdings had a positive impact on Alibaba’s share price, while Softbank’s Archegos losses had a short-term negative impact. However, the overall long-term impact of Softbank’s moves on Alibaba’s share price is likely to be positive, as Softbank continues to support the company’s growth and expansion.