SoftBank says additional Alibaba ADS registration not tied to future deal

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TOKYO (Reuters) – Alibaba (NYSE:BABA)’s recent registration of additional American Depository Shares is not tied to any specific future transaction by SoftBank Group Corp, a spokesperson for the Japanese conglomerate said on Wednesday.

“The registration of the ADR conversion facility (F6 filing, which was filed by Alibaba), including its size, is not tied to any specific future transaction by SBG,” SoftBank said in a statement to Reuters.

E-commerce giant Alibaba last week filed to register an additional 1 billion American Depository Shares. The move, Citigroup (NYSE:C) analysts said this week “might also suggest potential selling intention by SoftBank”.

“Since Softbank (OTC:SFTBY) has been a pre-IPO investor, we believe a large proportion of those shares have not been previously registered as ADS,” wrote Citi analysts, including Alicia Yap.

But in a fresh research note on Wednesday, Citi said Alibaba might have registered in advance a large number of ADS to support future plans of shareholders to convert the company’s Hong Kong stocks to those listed in New York.

SoftBank Chief Executive Masayoshi Son told analysts he was “surprised” and had not requested the filing, according to a person familiar with the matter speaking on the condition of anonymity.

SoftBank’s shares rose almost 6% in Tokyo trading, with Alibaba’s Hong Kong shares up nearly 7%.

SoftBank’s stake of around 25% in Alibaba is worth about $82 billion and has its origins in a $20 million investment in 2000. That rivals SoftBank’s own market capitalization of about $80 billion.

Alibaba’s shares have fallen by 60% since highs in October 2020 amid a regulatory crackdown against tech firms in China.

SoftBank has used its Alibaba shares as collateral for loans and trimmed its stake using derivatives to capture upside from any rise in Alibaba’s share price.

With SoftBank’s fund raising plans in disarray after the collapse of the sale of chip designer Arm to Nvidia (NASDAQ:NVDA), the spotlight is on other potential asset sales as the group expands investing through its Vision Fund and buys back shares.

SoftBank’s shares are down by about half from highs in March last year. The group squeezed out a profit in the October-December quarter after an upswing in valuations in Vision Fund’s private assets offset falling shares in its listed portfolio.

The group’s loan-to-value ratio rose to 22% from 19% three months earlier as the net value of SoftBank’s assets fell and debt rose. Son has pledged to keep the ratio below 25% in normal times.