SoftBank CEO Masayoshi Son Is Giving Up On Jack Ma’s Alibaba

SoftBank has reduced its ownership in Alibaba to less than 4 percent from 25 percent in less than a year.

Jack Ma in a black jacket and Masayoshi Son in a gray suit.
Jack Ma (left) and Masayoshi Son in 2010. Visual China Group via Getty Images

Japanese conglomerate SoftBank (SFTBF), headed by Korean-Japanese billionaire Masayoshi Son, is severing ties with Chinese internet giant ALIBABA (BABA), a crown jewel of its investment portfolio for more than 20 years. It signals the end of a decades-long business relationship between Son and Jack Ma, Alibaba’s founder and former CEO,  and Son’s waning faith in China’s internet titans after a few tumultuous years of government crackdown and Covid disruptions.

SoftBank has sold roughly $7.2 billion worth of Alibaba shares this year through prepaid forward contracts, the Financial Times reported yesterday (April 12), citing an analysis of regulatory filings. A prepaid forward contract allows a shareholder to cash out on a stock sale immediately but pay capital gain taxes later.

The sale reduced SoftBank’s ownership in Alibaba to 3.8 percent from 25 percent at the beginning of last year. The Japanese firm sold $29 billion worth of Alibaba shares in August. Its remaining stake in the company is worth about $9.5 billion.

Alibaba shares, traded on the New York Stock Exchange, fell 3 percent in yesterday’s after-hour trading before recovering 2.5 percent today (April 13). Alibaba’s stock price is down 70 percent from its peak in October 2020.

Masayoshi Son is one of the earliest backers of Alibaba

Son founded SoftBank in 1981 initially as a telecom company and later grew it into an investment powerhouse. SoftBank was the first major outside investor in Alibaba when it was just a tiny startup based out of an apartment building in Hangzhou, Jack Ma’s hometown. Son invested $20 million in the company in 2000 despite Ma’s lack of experience in sales or management. That stake was worth $130 billion 18 years later.

“His business model was wrong, but I could tell from the way he talked that he has charisma and leadership,” Son said of his first impression of Ma during an interview with Bloomberg in 2017.

Alibaba bolstered Son’s reputation as a tech investor, whose many early bets during the 1990s and early 2000s failed.

Son and Ma growing apart since Covid

Until 2020, Son was a board member of Alibaba and Ma sat on the board of SoftBank. But the business duo grew distant in recent years after Ma retired from Alibaba in 2018 and vanished from the public eye in 2020 following a spat with the Chinese government.

Last year, SoftBank cashed out of Alibaba as recession fears loomed and its venture capital unit, the SoftBank Vision Fund, suffered huge losses. SoftBank also dumped its shares in Uber and Opendoor, an online real estate marketplace, in order to “strengthen our defense against the severe market environment,” the company said in a regulatory filing in August.

Ma’s companies were at the center of the Chinese government’s crackdown on the country’s large tech companies during the pandemic. In early 2021, Alibaba was fined $2.9 billion for violating China’s antitrust laws. It was the largest penalty ever imposed on a business in China. A few months earlier, Ma’s other company, fintech giant Ant Financial, was forced to cancel a $37 billion initial public offering for no obvious reasons.

Ma recently returned to China after living overseas for more than two years. His return is seen by many as a sign the Chinese government is again warming up to private-sector businesses after three years of strict Covid restrictions that stifled economic growth. In March, Alibaba announced it would split into six independent companies. 

SoftBank CEO Masayoshi Son Is Giving Up On Jack Ma’s Alibaba