Image source: Visual China
Putting aside the "revolutionary" friendship between Son and Jack Ma, the most important task of SoftBank at present is to make ARM a successful IPO, and then replan the long-term layout of the Vision Fund, which requires "addition and subtraction". Of course, there are also geopolitical considerations here, after all, SoftBank's gold fathers are still mainly invested by European and American institutions. At the same time, SoftBank's more than 20-year bond with Alibaba is still a legend in the investment and technology circles. This SoftBank liquidation of Ali means the end of the classical Internet entrepreneurship era.
Ali and SoftBank, Jack Ma and Masayoshi Son, since SoftBank first invested in Alibaba in 2000, the two sides have maintained a long-term cooperative relationship of more than 20 years, and have also become a good story for overseas venture capital and Chinese Internet companies. With the changes in China's Internet market and global competitive environment, SoftBank finally reduced its stake in Alibaba through liquidation in 2023, retaining only 3.8% of the symbolic equity, which seems to be the end of the war, and Alibaba in the post-Jack Ma era has truly entered a new era.
SoftBank has sold about $7.2 billion worth of Alibaba shares through prepaid forward contracts, compared with about $29 billion in Alibaba shares last year, according to regulatory filings from the U.S. Securities and Exchange Commission, which also sent Alibaba's shares down 6 percent and dragged down the entire Chinese concept stock.
However, SoftBank's liquidation-style reduction has long been expected by market investors, or this is the final chapter of SoftBank's gradual reduction of Alibaba's shares since 2019. Therefore, SoftBank's reduction of holdings for Alibaba's stock price is more of a psychological impact, and its real impact is even lower than SoftBank's previous announcement of withdrawal from Alibaba's board.
Of course, SoftBank chose to reduce its holdings of Alibaba's shares for a rather high-sounding reason: to cash out Alibaba's shares to make up for its huge losses and pave the way for the listing of the chip giant ARM it acquired. According to public data, SoftBank's net loss in fiscal 2021 was about 1.7 trillion yen, a historical record, and it was still weak in fiscal 2022, with a pre-tax loss of 290.037 billion yen and a net loss attributable to shareholders of 912.513 billion yen for the nine months ended December 31, 2022.
The big bull market in technology stocks in 2020 also made SoftBank profitable, but the bear market in technology stocks in the next two years not only caused SoftBank's investment income to plummet, but also its main Vision Fund was also bullished, which made Son Masayoshi, the head of SoftBank, known as the "beast maker", under great pressure, and cashing out Alibaba shares became an important lifesaver. Although Alibaba's market value fell to $200 billion at its IPO in 2014 at its worst, a 75% drop from its peak market value of more than $800 billion, considering SoftBank's long holding period and repeated position increase operations, the highest shareholding ratio exceeds 20%, and its absolute return is still a legend in the venture capital industry.
In fact, SoftBank and Yahoo's stakes in Alibaba support their valuations in the capital markets. After Yahoo withdrew from the Internet stage and Ali itself transformed into a group holding company model, the breakup between SoftBank and Ali has long been doomed, and this breakup has no substantial loss for both parties, which can be said to be a joy for everyone.
Judging from Daniel Zhang's recent moves, the main task of Alibaba's management now is to reshape the post-Jack Ma management model with the group holding company model, which means delegating power at the group level and stimulating competition. For the heads of business departments such as Alibaba Cloud, Taobao, and Tmall, its core task is to start a second business and spin off and go public independently in the future. From "one Ali" to Ali Group Holding Company, whether it is the internal management model, corporate culture, and even the reshaping of the external image, it is a huge challenge, and after getting rid of the identity baggage of SoftBank as an old investor, it is naturally more conducive to light travel for the new Ali.
For SoftBank and Son, putting aside the "revolutionary" friendship between Son and Jack Ma, in 2023, SoftBank's most important task is to make ARM a successful IPO, and then re-plan the long-term layout of the Vision Fund, which requires "addition and subtraction", the addition is naturally to continue to bet on ARM, and the subtraction is to reduce the equity of Ali, SenseTime and other companies. Of course, there are also geopolitical considerations, after all, SoftBank's gold owners are still mainly invested by European and American institutions, and ARM's successful IPO is inseparable from the green light given by the British and US governments.
Finally, the more than 20-year bond between SoftBank and Alibaba, and the sympathy between Son and Jack Ma, is still a long-standing legend in the investment and technology circles. It's just that the legend is destined to have an end, and this SoftBank liquidation reduction of Ali means the end of the classical Internet entrepreneurship era, and a new legend will be born in the new entrepreneurial era represented by AI in the future. (Fortune Chinese Network)
Editor: Liu Lanxiang
The author is a columnist for Fortune Chinese. This content is the author's independent opinion and does not represent the position of Fortune Chinese. It may not be reproduced without permission.
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