- The dwindling fortunes of the Chinese tech shares have prompted concerns over Alibaba Group Holding Ltd BABA stake selloff by SoftBank Group Corp SFTBY SFTBF, the Wall Street Journal reports.
- SoftBank's single most significant investment in the e-commerce giant was hit hard by the domestic crackdown.
- The Nasdaq Golden Dragon China Index of U.S.-listed Chinese stocks has declined 52% over the 12 months through March 25. Alibaba plunged 49%, and SoftBank's Tokyo-listed stock decreased 40%.
- Also Read: JPMorgan Downgrades Alibaba and Other China Tech Stocks Following Selloff; Calls It "Uninvestable" For Next 6-12 Months
- Falling valuations for SoftBank's holdings pushed it close to its self-imposed debt limit of a loan-to-value ratio of 25%, implying limits on new borrowing, investments, and share buybacks, as per an analyst.
- Alibaba's contribution to SoftBank's overall net asset value plunged to 24% as of December 2021, down from a September 2020 peak of 60, WSJ noted%.
- From April through December 2021, SoftBank raised $6.9 billion of asset-backed financing using Alibaba shares. I
- SoftBank's asset-backed financing using Alibaba stock was worth ~$25.8 billion in 2021 or ~35% of its Alibaba holding.
- Investors saw SoftBank potentially sell part of its near-25% stake in Alibaba.
- However, China's latest assurances to restore market confidence and Alibaba's buyback boost helped the Chinese company's shares recoup most of their year-to-date losses.
- Price Action: BABA shares traded higher by 0.67% at $113.75 on the last check Monday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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