Hard to believe that Softbank is throwing in the towel on its stake in Alibaba (BABA), but that is what is happening.
If you can remember, Alibaba was that can’t miss e-commerce company that ran into the wall that is the Chinese Communist Party (CCP).
They were then regulated into oblivion.
Even through arbitrary lockdowns, Softbank didn’t sell its stake so I find it peculiar that they would finally decide to divest out of China because maybe they know something that I don’t.
The golden years of Chinese ecommerce development is far in the rear view mirror.
However, there was a reason Softbank held onto its BABA stake for all this time, and BABA being a monopoly is a great reason.
This relationship epitomized the freewheeling globalization which many of us grew to love in the early 2000s and the decades after that.
That type of globalization has been replaced by something a lot more insidious that looks something more similar to balkanization.
It could be a simple as getting money out of China.
Many investors have recently said withdrawing money abroad has become almost impossible these days as the CCP has really tightened up capital outflow.
This is not only bad news for Chinese tech companies, but bad for all international tech deals in general at a time when venture capital money in tech has dried up.
SoftBank has sold more than $7 billion in Alibaba shares this year through prepaid forward contracts, after selling $29 billion last year.
The contracts give SoftBank the option to buy the shares back from Alibaba, but the group has settled previous deals by handing over the stock.
The sales will reduce the Japanese conglomerate’s ownership of Alibaba to less than 4% which is a far cry from the 14.6% stake the company said it was slated to hold as of end-September.
Softbank once owned about a third of the company spanning from an early $20 million investment in one of venture capital’s most famous bets.
Last month, the online commerce leader said it plans to split its $240 billion empire into six units that will individually raise funds and explore initial public offerings.
SoftBank, once one of Silicon Valley’s largest investors, has been crippled by billions of dollars of losses.
SoftBank’s billionaire founder Masayoshi Son has said he wants to focus on a planned listing of its chip design unit Arm Ltd. later this year and make the debut “the biggest” in the history of the semiconductor industry.
The re-listing of Arm, which had traded on the London exchange prior to SoftBank’s $32 billion acquisition in 2016, is expected to be a big windfall for the world’s biggest technology investor.
However, the Arm deal could be one of the last in the door for tech as many economies have become nationalistic and inward looking.
India is supposed to be the next China, and I believe it will be difficult for Silicon Valley money to get ahead there if defensive barriers are erected in the support of local capital.
The golden years of Silicon Valley are in the record book, and the next chapter appears to be focused on generative artificial intelligence super charging profits.
Tech shares will see a big decoupling of companies that jump on this hot new technology and the ones who are left behind.
Like always in Silicon Valley, iterate or die.
