SoftBank on Wednesday announced it will sell a four percent stake in Alibaba Group in a sale that will see it dispose of shares in the Chinese e-commerce giant for the first time since it invested in 2000. After the transaction, the Japanese telecom operator will still remain Alibaba’s biggest shareholder with 28 percent, Xinhua reported.Alibaba said it has agreed to pay $2 billion in cash to buy back shares from SoftBank. In addition, Alibaba founders and executives agreed to acquire $400 million worth of Alibaba shares at the same price. According to SoftBank, it will sell Alibaba shares worth $500 million to a sovereign wealth fund. It will also issue $5 billion in mandatory exchangeable trust securities that can be converted into Alibaba shares in three years. Also Read - Jack Ma's Alibaba fined record $2.7B by ChinaAlso Read - Ant Group ordered by China to reexamine its fintech businesses and return to its roots as a payments service
SoftBank said the share sale would help increase its liquidity cushion, improve its leverage ratio and enable flexible and prudent financial management. Also Read - India bans 43 more Chinese apps over security concerns
“Under the leadership of Masayoshi Son, SoftBank has been a highly valued, long-time partner of Alibaba for more than 16 years, and we look forward to continuing our strong partnership together,” said Jack Ma, Executive Chairman of Alibaba. “As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to re-invest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders,” said Ma.
SoftBank invested $20 million and $60 million in Alibaba in 2000 and 2004, and the investment has been a huge success. By Tuesday, Alibaba had a market capitalization of $208.8 billion.