Mar 28, 2023
SoftBank Shares Soar After Alibaba Unveils Breakup Plans
(Bloomberg) -- SoftBank Group Corp. surged in Tokyo trading after Alibaba Group Holding Ltd. announced a six-way split of its businesses, fueling optimism for a recovery at one of the Japanese company’s most important holdings.
The Tokyo-based company’s stock rose as much as 6.2% in early trading, the biggest intraday move since October.
“There had been anxiety over the global banking system, but that has started to subside. And now we have this Alibaba news, which is clearly a positive for SoftBank,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “The expectation is for the spinoff units to have their businesses properly valued, which will boost Alibaba’s overall corporate value.”
SoftBank founder Masayoshi Son has relied on his Alibaba stake in recent years to generate cash for other startup investments and to compensate for losses in his portfolio. Alibaba’s market capitalization slid with the Chinese government’s crackdown on tech giants though, falling from a peak of more than $850 billion in 2020 to about $220 billion before the breakup announcement.
Alibaba shares rose 14% in New York trading after the split announcement, pushing its market value to about $255 billion. Still, SoftBank is working through other challenges among its portfolio companies, which may moderate any stock gains.
“It’s going to be a slow recovery from here,” said Fujiwara. “The upside for the stock price will be capped until we see an overall turn around in sentiment for Nasdaq and technology firms.”
(Updates with analyst comment from third paragraph)
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