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$7.9 Billion of it Alibaba Stocks Planned to be Sold by Top Shareholder Softbank

$7.9 Billion of it Alibaba Stocks Planned to be Sold by Top Shareholder Softbank
At least $7.9 billion of shares of in Chinese e-commerce company Alibaba Group Holding Ltd in order to raise funds to reduce its debt would be sold out by Japanese telecommunications and internet firm Softbank Group Corp, the company announced.
Since Softbank began investing in the company in 2000, this is the first instance of sale of Alibaba shares by the bank. From a 32.2 percent stake in March, Softbank's Alibaba stake will fall to about 28 percent of the Chinese firm.
Strategic partnership would be maintained by both companies. While Alibaba Executive Chairman Jack Ma will remain on the board of Softbank, Softbank Chairman and Chief Executive Masayoshi Son will remain a director at Alibaba.
An offering by a new Softbank-controlled trust of $5 billion to $6 billion in securities that convert in three years into Alibaba stock, a $500 million sale of shares to an unidentified sovereign wealth fund, a sale of $400 million in shares to the Alibaba Partnership, a 34-person group made up of Ma and other Alibaba founders and a $2 billion sale of shares to Alibaba itself are included in the deal.
After the Softbank sale, a "buy" rating on Alibaba was given by Stifel analyst Scott Devitt in a note. "We do not view this as a shift in confidence from a major investor. In fact, it could remove an overhang of expectation of such an event," he wrote.
The announcement, in a report, that the accounting practices for its stake in a logistics firm, related-party transactions, and operating data of its annual "Singles' Day" sale were under investigation by the SEC was made by Alibaba last week which unnerved investors.
"Enabling flexible and prudent financial management” and to increase its own liquidity cushion, booth part of Softbank’s, “transformational strategy”, were the main aims of the stock sales, said the bank which is also the owner of U.S. telecom company Sprint Corp.
Cash on hand would be used to buy the $2 billion of its shares, Alibaba said.
Softbank will not transfer any Alibaba shares held by the company for six months according to a lockup agreement with Alibaba that Softbank has entered into in connection with the transaction.
The sale of its core business is being explored by U.S. web company Yahoo Inc. the US Tech company has also been contemplating the ways and means to dispose of its 15 percent stake in Alibaba. However the concerns that Yahoo would incur a major tax bill have complicated that potential sale. Alibaba is not interested in buying the stake from Yahoo at a high price said people familiar with the matter.
Yahoo did not respond to a request for comment and an Alibaba spokeswoman declined to comment on the Yahoo-owned stake.
According to a statement of the offering's terms, Morgan Stanley and Deutsche Bank will manage the sale of the $5 billion in securities.

Christopher J. Mitchell

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