Chinese e-commerce leader Alibaba Group Holding Ltd. slumped in Hong Kong, after the Financial Times reported that its early backer SoftBank Group Corp. is moving to sell the majority of its stake in the company.
The tech giant dropped as much as 5.2% on Thursday to head for its biggest one-day decline since Feb. 24. SoftBank’s ownership of Alibaba will be reduced to less than 4% from 14.6% in September if the group doesn’t exercise the option to buy back shares after selling over $7 billion of its holdings through prepaid forward contracts this year, the paper reported.
“The news might cause some near-term pressure for Alibaba given that its early backer is pulling out,” said Steven Leung, UOB Kay Hian executive director. “But since it’s been expected by the market for a long time, I don’t think the negative impact will be huge. Some investors who are optimistic about Alibaba’s overhaul plan may choose to buy on dips, once shares are down.”
Alibaba’s shares have gained almost 50% from an October low, helped in part by the company’s plan to split into six units that will individually raise funds and explore listings. The stock has also been buoyed by signs that a regulatory crackdown on the sector may be easing.
SoftBank’s stock rose as much as 1.8% on Thursday before erasing gains to trade 0.3% lower in Tokyo. There’s now a greater chance that the Japanese conglomerate will announce a share buyback given the progress to monetize its asset holdings, Citigroup analyst Mitsunobu Tsuruo wrote in a note on Thursday.
