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Additional Alibaba ADS Registration Not Related To Any Future Deal, Says SoftBank

Additional Alibaba ADS Registration Not Related To Any Future Deal, Says SoftBank
A representative for SoftBank Group Corp said on Wednesday that Alibaba's recent registration of new American Depository Shares is unrelated to any specific potential deal.
"The registration of the ADR conversion facility (F6 filing, which was filed by Alibaba), including its size, is not tied to any specific future transaction by SBG," SoftBank said in a statement to the media.
Alibaba, the e-commerce behemoth, filed paperwork last week to register an extra 1 billion American Depository Shares. This week, Citigroup analysts speculated that the action "may possibly indicate SoftBank's desire to sell."
"Since Softbank has been a pre-IPO investor, we believe a large proportion of those shares have not been previously registered as ADS," wrote Citi analysts, including Alicia Yap.
However, Citi stated in a new research note released on Wednesday that Alibaba may have registered a big number of ADS in advance to support owners' ambitions to convert the company's Hong Kong equities to those traded in New York.
According to a report quoting a source, SoftBank CEO Masayoshi Son told analysts he was "surprised" and had not authorized the file.
SoftBank's stock jumped about 6 per cent in Tokyo trading, while Alibaba's Hong Kong stock rose nearly 7 per cent.
SoftBank's stake in Alibaba is worth roughly $82 billion and dates back to a $20 million investment in the year 2000. SoftBank's market capitalization, which is around $80 billion, is comparable.
Alibaba's stock has dropped 60 per cent since its October 2020 highs, owing to China's regulatory crackdown on digital companies.
SoftBank has used Alibaba shares as collateral for loans and has reduced its interest in the company by utilizing derivatives to profit from any increase in Alibaba's stock price.
With SoftBank's fund-raising plans in shambles following the failure of the sale of chip manufacturer Arm to Nvidia, the focus is on other possible asset sales as the company extends its Vision Fund and buys back shares.
SoftBank's stock is down roughly half of what it was in March of last year. The company turned a profit in the third quarter when rising valuations in Vision Fund's private assets offset falling shares in its publicly-traded company.
As the net value of SoftBank's assets declined and debt soared, the group's loan-to-value ratio increased to 22 per cent from 19 per cent three months earlier. In normal times, Son has promised to keep the percentage below 25 per cent.

Christopher J. Mitchell

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