SoftBank Group Corp. has raised as much as $22 billion in cash through the sale of prepaid forward contracts using Alibaba Group Holding Ltd. shares, the Financial Times reported, citing filings it has seen.
SoftBank has this year executed the sale of about a third of its Alibaba stake through these contracts, a type of derivatives that allows the Japanese company to raise cash immediately while retaining the possibility of holding on to the shares, the report said.
It has sold more than half its Alibaba stake through this type of derivatives, the report said. SoftBank could shrink its stake below the threshold for retaining its board seat and prevent it from including its share of Alibaba’s income in financial statements, it added.
SoftBank Group shares rose 2.6 per cent in Tokyo trading, while the benchmark Topix was flat. Alibaba shares climbed 4.7 per cent in Hong Kong following a rebound in the Nasdaq 100. The e-commerce giant is scheduled to report earnings later in the day.
SoftBank has raised money by selling derivatives linked to Alibaba shares since at least 2016, opting for such complex transactions instead of a straight sale to reduce pressure on the Chinese company’s share price. About $13.17 billion was raised through prepaid forward contracts using Alibaba shares, from new contracts, rollovers and early termination of existing contracts in the year ended March, SoftBank said in its earnings report published in May.