SoftBank to Take $34B Gain From Alibaba Forward Contracts

August 11, 2022

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The Japanese multinational holding company SoftBank Group announced on Wednesday that it will take in a gain of 4.6T Yen which equates to approximately $34B for settling prepaid forward contracts that use shares of Alibaba Group Holding. The move by Softbank will reduce its stake in the Chinese tech firm from 23.7% to 14.6%. Additionally, by physically settling the contracts it means SoftBank will surrender its ability to repurchase the stock at a future point in time. Previously, when SoftBank acquired funds through its BABA position, the firm kept open the option to repurchase the shares it let go through forward contracts. This move by SoftBank could have a few different effects on Alibaba’s market and earnings. On one hand, it could signal confidence in Alibaba’s future prospects, as SoftBank is willing to give up the option to buy back shares at a future date. On the other hand, it could also be seen as a sign that SoftBank is looking to cash in on its investment in Alibaba while the company is still doing well, and may not be as confident in Alibaba’s long-term prospects. Only time will tell how this move by SoftBank will affect Alibaba’s market and earnings.

Market Reaction

On Wednesday, after the release of news that SoftBank would take a $34 billion gain from Alibaba forward contracts, Alibaba’s($NYSE:BABA) stock opened at $91.2 and closed at $92.4, up 1.4% from its prior closing price of $91.2. Despite the positive stock movement, media coverage of the event was mostly negative, with many questioning the ethics of the move and its potential implications.

VI Analysis

Company’s fundamentals reflect its long term potential. The intrinsic value of ALIBABA share is around $278.1, calculated by VI Line. Now ALIBABA stock is traded at $92.4, undervalued by 67%.


Alibaba’s share price rose by 1.4% the day after it was announced that SoftBank would be taking a $34 billion gain from forward contracts with the Chinese e-commerce giant. This came despite some negative news, including the arrest of a former Alibaba executive, which had been circulating prior to the announcement. Alibaba has been a huge success story, and its share price has reflected that, rising steadily over the past few years.

However, there have been some concerns recently about the company’s ability to maintain its growth, especially in the face of increased competition from other Chinese e-commerce firms. Despite these concerns, Alibaba remains a tempting investment opportunity, especially for those looking for long-term growth potential. The company is still growing rapidly and is expanding into new areas, such as cloud computing and artificial intelligence. Given its strong track record, Alibaba is likely to continue to be a major force in the e-commerce world for years to come.

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