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AI companies have immense potential to aid in surveillance and antidote search amid the coronavirus outbreak. Here are three stocks to keep a close watch on
(Bloomberg) -- Another activist investor has bought a stake in SoftBank Group Corp., betting the recent stock plunge makes it a bargain that’s too good to ignore.Asset Value Investors Ltd., a U.K. money manager known for its activist campaigns at smaller Japanese firms, has invested about 5 billion yen ($46.6 million) in Masayoshi Son’s company, Chief Executive Officer Joe Bauernfreund said. That comes after Elliott Management Corp. took a large position and called on SoftBank to buy back shares.SoftBank was sucked into the coronavirus sell-off, losing more than half its value from a high in mid-February before paring some of the decline. The reversal came as founder Son decided to do what investors had been urging for years -- sell holdings to fund shareholder returns and pay down debt.“It’s very, very cheap,” Bauernfreund said in an interview. “It trades at a massive discount to the value of its assets. And on top of that, the planned asset disposal and buyback will be massively accretive to the net asset value.”AVI has become known in the Japanese investment community for its activist campaigns at companies including Tokyo Broadcasting System Holdings Inc. and Teikoku Sen-I Co., both of which it has urged to increase shareholder returns.SoftBank is too big for AVI to make shareholder proposals at annual general meetings, Bauernfreund said. AVI started buying SoftBank shares in February and continued to build its position throughout March, he said.Still, AVI has prescriptions for SoftBank, and they sound very similar to Elliott’s suggestions. It has written to SoftBank directors to express its views, Bauernfreund said.Buybacks, Governance“They should be selling down some of their investment portfolio, using the money to buy back shares,” he said. “They should be improving their corporate governance by improving the board structure, and by having more transparency in their investment portfolio, in particular in the Vision Fund.”SoftBank declined to comment.SoftBank currently trades at about a 70% discount to its net asset value, Bauernfreund said. The company has a market value of about $73 billion, even though it has equity holdings worth more than $208 billion, including a huge stake in Alibaba Group Holding Ltd., according to data compiled by Bloomberg.“The discount won’t stay at the current level,” Bauernfreund said. “It’s mathematically impossible, really, for the discount to stay at these wide levels.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Singapore’s government urged residents to consider ordering their groceries online rather than going to the shops. That just became tougher.Alibaba Group Holding Ltd.’s Lazada Group SA is temporarily suspending new grocery orders in Singapore after strict physical distancing measures and rising coronavirus cases triggered a surge in orders.RedMart, Lazada’s online grocer unit, will not take new orders until it resumes on April 4, the company said in a notice to customers on Thursday. RedMart will use this time to make changes to the range of products available and prioritize daily essentials such as rice, flour and eggs, it said, adding that it will fulfill existing orders.Lazada’s RedMart and other grocery delivery services such as Amazon.com Inc.’s Prime Now have been kept busy amid harrowing economic times in Singapore. These companies have been trying to cope with surging demand as about 5.7 million people in the densely populated island increasingly turn to online grocery shopping, part of Singapore’s S$7.5 billion ($5.2 billion) grocery market estimated by Euromonitor.“These companies now have to deal with a new situation where demand for essential items outpaces operational capacities,” said Yinglan Tan, founding managing partner of Insignia Ventures. “Players that manage shorter supply chain may be more equipped to handle the stress.”While the number of coronavirus cases has mounted to 1,000, the city-state has refrained from ordering a full lockdown of daily life and business, preferring to implement an ever-more-stringent set of rules and guidelines to restrain activity and curb the spread. Among the new cases was an employee working at a branch of a local supermarket chain NTUC FairPrice.And while lockdowns in neighboring Malaysia may have disrupted food supply into Singapore, government officials have assured the nation it won’t run out of food or basic necessities.NTUC FairPrice on March 27 imposed online purchase limits on items such as rice, instant noodles, vegetables and cooking oil.Read more: Singapore Grocery Delivery Demand Surges Amid Virus Curbs: ChartSingapore’s government advised the public on its official WhatsApp channel to order groceries online instead of venturing out, while also pushing more companies to make staff work from home. To help address a shortage of delivery slots, taxi and ride-hailing drivers are now allowed to make food and grocery deliveries.Separately, the city-state said Thursday it’ll support 90% of the cost for local retailers going online in order to help them diversify their sales channels beyond traditional brick-and-mortar.(Adds FairPrice online purchase measures in 8th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- SoftBank Group Corp. needs to cut and run on its entire WeWork investment, not just the shares. Covid-19 and the economics of a prolonged crisis necessitate strict pragmatism.As recently as two weeks ago, it seemed that a move to renegotiate the Japanese conglomerate’s $3 billion purchase of equity in The We Co. from existing shareholders, including founder Adam Neumann, was savvy and cunning. Today, that looks ill-advised, which is why it decided not to consummate the tender offer, Bloomberg News reported, citing a statement from a committee advising WeWork's board.After a $1.5 billion lifeline late last year, the next step in SoftBank’s bailout of the office rental company — predicated on completing the share purchase — was to be a further $5 billion in debt financing. Masayoshi Son, opportunistic venture capitalist that he is, should walk away from that deal, too.With WeWork bonds trading at around 36 cents on the dollar and the global economy in upheaval over the coronavirus pandemic, there’s no price in the world that could have made SoftBank’s double-down on the shares look smart. Pouring $5 billion into WeWork debt would be a poor use of its funds.SoftBank has bigger problems at the moment.Last week, Moody’s Corp. cut its debt by two notches, citing SoftBank’s planned offload of assets that amounts to little more than a fire sale. Son wants to monetize them through sales or loans to repurchase the company’s own shares and pay down debt. SoftBank fired back at Moody’s. It claimed that the downgrade would “cause substantial misunderstanding,” and then asked Moody’s to remove its rating altogether. That temper tantrum merely proved the ratings provider correct.Despite a broad portfolio that includes its stake in the Vision Fund, its domestic telecommunications operator, a U.S. telco, and a semiconductor company, the only asset that SoftBank has of significant value is its 25% stake in Alibaba Group Holding Ltd. Those shares aren’t very liquid and could take months to sell. Son doesn’t have time. Many Alibaba investors believe that the e-commerce company has gotten through the worst of the Covid-19 crisis and will benefit from a return to normalcy in China.What they aren’t reckoning on is an unavoidable global slowdown that could have a profound impact on the spending power of Chinese consumers, who drive revenue. We’re in the eye of the storm now, where things seem calm but soon won’t be. Selling a massive chunk of Alibaba shares at any price is going to become more difficult.Bad as things might get for an internet giant, they’re going to be a whole lot worse for a shared office company. Co-working spaces are anathema to the wave of social distancing that’s sweeping the world. Many of WeWork’s clients are freelancers or startups and likely to be hardest hit in any downturn. The company is trying to soften the blow by seeking rent reductions from its own landlords, who are showing reluctance. Walking away from its pending $5 billion investment in WeWork debt is not only an honest verdict on that outlook, it also means $5 billion of shares in Alibaba that SoftBank doesn’t have to sell to cover its funding needs. Ask any investor in the world where they’d prefer to put a chunk of money right now, and I am sure WeWork bonds won’t be their choice.Masayoshi Son isn’t the type to follow what others might do, but perhaps this time he should.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Group Holding (BABA) reportedly plans to invest in a courier firm, Yunda, in a bid to expand its presence in the growing express delivery industry.
(Bloomberg) -- China’s consumers are shopping online again. But their purchases signal they plan to stay indoors for the foreseeable future, dashing hopes for a spending recovery as the nation contemplates its post-virus world.Lunch boxes saw 120 times more searches in the last 30 days as the virus pushes people to prepare their own food even after returning to the office, according to March 26 data from Index.1688, which collects information from Alibaba Group Holding Ltd.’s shopping sites.Portable tableware, foldable spoons and work clothing also surged in popularity, while items typically given as gifts or used for travel and outdoor activities haven’t shown signs of recovery.Yoga mats and hula hoops for home exercise also climbed in demand, a bad sign for gyms waiting for the return of patrons.The data undermines predictions of a V-shaped recovery in the world’s biggest consumer market that has seen more than 80,000 infections and 3,000 deaths from Covid-19. While big operators like Starbucks Corp. and Yum China Holding Inc. have been reopening outlets, they face a public that’s preferring to stay home after work and continue to social distance, even though official data indicates China’s number of new infections fallen to zero.China’s experience may prove an important indicator for how the rest of the world recovers. Even after outbreaks are contained, lingering fear is likely to change consumer behavior for longer than expected.“Consumers are still cautious about going out and many of those venues are not yet back to full working mode,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel. Items for a return to work, such as instant coffee, hair and skin-care products, are recovering ahead of the market, he said.Other products to post a spike in searches include contact-less thermometers, suits and stationery, according to Index.1688.A report by JD.com Inc.’s research center also shows work-related consumption speeding ahead of other categories. China’s second-largest e-commerce company sold five times more lunch boxes in late February than a month earlier, while powerbanks, office equipment and stationery are also high up the list.“Consumption of staples is clearly outshining discretionary or luxury goods in what is still very much a lukewarm and uneven recovery,” Ned Salter, head of global research at Fidelity International, said in a statement. “We need to see more consumer confidence to sustain the improvement and that will depend on how well China deals now with imported cases to contain the virus fully.”A Coronavirus Vaccine in 18 Months? Experts Urge Reality CheckRetailers in China have been cautious in their forecasts since the virus emerged.Yum China Holding Inc., which operates KFC and Pizza Hut in the country, has said the second quarter will be “challenging” and patience is needed. Anta Sports Products Ltd., the country’s biggest sportswear maker, forecasts the first six months of 2020 will be “tough throughout”.About 60% of listed restaurant operators in China are at risk of running out of cash within six months, according to data compiled by Bloomberg and company reports.With the food and beverage industry reeling, local governments are trying to boost consumption by urging officials to dine out in restaurants and shop in malls. Vouchers are being given out by cities including Hangzhou and Nanjing as well as shopping platforms Meituan Dianping and Suning.com Co. to spur spending.While China’s new infection numbers have plunged, the pandemic is widening globally with cases worldwide now topping 786,000 and more than 37,800 dead. Chinese factories are experiencing a second shockwave as western clients cancel orders en masse.Luiz Chen, a 31-year-old auditor in Guangzhou, recently bought moisturizing masks and a new dress before returning to the office but said she won’t be treating herself to anything expensive after her employer froze bonuses for the past two months.“I’m scared to get a salary cut or even lose the job,” said Chen. “Economic crisis seems not far away. How can I have the good mood to buy buy buy?”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba Group Holding Ltd plans to buy at least 10% of Yunda Holding Co Ltd, marking the e-commerce giant's fifth investment in a large courier, two people with knowledge of the matter told Reuters. Alibaba is looking to buy the stake from Yunda's controlling shareholders - founding couple Nie Tengyun and Chen Liying - who own 52.19% of Yunda through their wholly owned firm Shanghai LuoJieSi Investment Management, said one of the people. The other person said China's dominant e-commerce firm could go beyond 10% and buy up to 15% of Shenzhen-listed Yunda.
(Bloomberg) -- Meituan Dianping surged as much as 10% after the internet services giant said its food delivery business began to recover in March, when shuttered restaurants re-opened and much of China returned to work.Meituan, backed by Tencent Holdings Ltd., told analysts on a conference call Monday that demand for food delivery picked up this month, putting it on track for a longer-term recovery after Covid-19 froze a swath of the world’s second largest economy. But it also projected an operating loss and revenue decline this quarter, and warned that the full extent of fallout from the pandemic -- particularly on its travel and ride-sharing businesses -- remained uncertain in 2020. Its stock was up roughly 7% in early trade after Daiwa lifted its price target and said Meituan should return to growth in the second half.Meituan joined sector bellwethers from Sony Corp. to Apple Inc. and Twitter Inc. in emphasizing the difficulty of parsing an unprecedented event and its impact on their business. The Chinese company is one of the most exposed of the country’s major tech corporations to the spread of Covid-19. The company’s outlook is further clouded by China’s worsening economy, which may contract this quarter for the first time since 1989, denting consumer spending.“Although we have seen gradual recovery from March especially for food delivery business, the active merchants of our in-store service category remain at a very low level as of late March,” Chief Financial Officer Chen Shaohui said on the call. “We expect consumers will need more time to build their consumption confidence for local consumption especially those discretionary consumption scenarios in our in-store business.”What Bloomberg Intelligence SaysDespite mild improvements in Meituan’s local services in late March as the virus outbreak subsided in China, the timing of a full operational recovery remains highly uncertain. Its food-delivery business may stay slow, with many restaurants still closed and consumers wary of interactions with delivery personnel. Its in-store, hotel and travel businesses may take even longer to recover, as users stayed home. Strong 42% sales gains and 117% gross-profit expansion in 4Q suggest Meituan’s longer-term growth drivers are intact. The company plans to maintain strategic investments in B2B food distribution and restaurant management systems.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.Read more: Chinese Abandon Food Delivery Fearing Drivers Will Spread VirusThe coronavirus dealt an as-yet unquantifiable blow to a company that, before the outbreak erupted in January, was on track to take its place among the country’s most influential technology corporations. While Meituan’s stock has taken a pounding like every other Chinese internet firm, a 2019 rally secured its position as China’s largest publicly traded internet firm after Alibaba and Tencent.“Market expectations were very low as investors have seen the damage COVID-19 has inflicted on offline service providers,” Nomura analyst Shi Jialong wrote.Meituan on Monday reported a better-than-expected 42% jump in revenue to 28.2 billion yuan ($4 billion) in the three months ended December, compared with the 26.5 billion-yuan average of analysts’ estimates. It booked a profit for the quarter of almost 1.5 billion yuan, versus expectations for a loss.The company still harbors ambitions well beyond its current core business. Meituan had been diversifying from takeout, investing in other online services including travel, competing directly against Alibaba Group Holding Ltd. But others are elbowing their way into Meituan’s turf. Ride-hailing giant Didi recently launched a delivery service similar to Uber Eats across major Chinese cities, while Alibaba-backed Alipay is also morphing into an all-in-one online services platform that allows everything from restaurant booking to car-hailing.Executives on Monday stressed the company will keep investing in new initiatives from bike-sharing to online groceries, an e-commerce segment that accelerated sharply after the pandemic forced millions to work -- and cook -- from home. Meituan said it’s setting up the logistics to support that business while exploring ways to roll out the business to more Chinese cities.“The pandemic has already caused severe disruptions to the daily operations of our merchants, including restaurants, local services merchants and hotels, which in turn resulted in downward pressure on our own operations for the first quarter of 2020,” Meituan said in its filing. “Due to the high uncertainty of the evolving situation, we are unable to fully ascertain the expected impact on full year 2020 at this stage.”Read more: Virus Outbreak Exposes $46 Billion Rift in China’s Tech IndustryFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The various levels of lockdown and quarantine across China haven’t proven a golden opportunity for the biggest food delivery and bookings company, a warning for on-demand service providers elsewhere as more of the world stays at home to avoid the coronavirus.Meituan Dianping says it will post a loss for the first quarter ending Tuesday following a decline in revenue. The Beijing-based company’s business consists of three main divisions — food delivery, restaurant and travel bookings, and other services such as car hailing, bike rental and groceries.Bookings, which account for around 23% of revenue, took the biggest hit. That was predictable. Consumers aren’t keen to take a seat at a restaurant or a night at a hotel amid a deadly disease outbreak, and widespread travel curbs meant moving around China wasn’t an option.Food was more of a surprise. Two months ago amid the Lunar New Year break, I theorized that such deliveries — at 56% of Meituan’s revenue — might bounce back quickly as customers opted to stay in rather than eat out. I was wrong.Thousands of vendors on Meituan’s platform were forced to close either voluntarily or by mandate, and thus couldn’t provide meals. Those who did stay open were often met with fear and complications on the demand side.Many customers had concerns not only over the safety of meals coming from restaurants, but the drivers who delivered them. Those still willing to order online were met with layers of challenges as local governments, neighborhoods and buildings exercised strict controls over who could come and go. There was no supply bottleneck for drivers; Meituan noted plenty of capacity on hand.Three weeks ago, Alibaba Group Holding Ltd. said that its own courier and food delivery services, Cainiao and ele.me, were back to full staffing. But the food business was still down because many restaurants remained closed.An upside has been grocery delivery. Meituan’s two services, self-operated and marketplace, have seen strong growth during the crisis, a trend that echoes what Alibaba experienced with its Freshippo service. In many cities, consumers either cannot or prefer not to step out to shop. They’re apparently less afraid of groceries brought to their door than fresh-cooked meals.Even as China returns to a certain level of normalcy, food delivery may struggle for another few months. Most companies are maintaining degrees of isolation, such as working from home or rotating shifts. Taking lunches to places of business is normally an important part of the consumption scenario. As investors start to ponder the outlook for Delivery Hero SE, Just Eat Takeaway, and GrubHub Inc., they’d do well to look at how their China peers have fared during the virus battle. Collectively, these companies get most of their revenue from Western markets that are now imposing lockdowns to battle the pandemic. They’re implementing contact-free and non-cash deliveries to make customers feel safe.That may not be enough. While it’s true that people still have to eat, China’s experience shows that this doesn’t mean consumers will necessarily order delivery or that restaurants can supply them.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Covid-19 test kits donated by the Jack Ma Foundation and the Alibaba Foundation arrived in Vientiane at Wattay International Airport on March 28.
As companies around the country and world suffer from the effects of the deadly novel coronavirus, some businesses are stepping up to help alleviate some of the economic impact. Here’s a list of some of their efforts so far. We’ll continue to update this list as more companies contribute to the relief effort.
The Jack Ma Foundation and the Alibaba Foundation today announced donations of essential medical supplies to seven more countries in Asia.
(Bloomberg) -- Masayoshi Son pledged an extra 10.1 million SoftBank Group Corp. shares to lenders in the past two weeks as he unveiled an ambitious plan to overhaul his Japanese conglomerate and silence critics.Son has now committed 227 million SoftBank shares as collateral, worth about $8 billion, according to regulatory filings. That’s about 40% of his 27% stake in the publicly traded conglomerate. The newly pledged shares were worth about $360 million at Friday’s close.The Japanese billionaire has more than tripled the level of pledging since 2013, turning to banks including UBS Group AG, Nomura Holdings Inc., Credit Suisse Group AG and Julius Baer Group Ltd. It’s not uncommon for the ultra-wealthy to borrow against their stock, but Son’s use of the tactic is among the most significant tracked by the Bloomberg Billionaires Index. The amount he’s pledged trails only Larry Ellison, Russia’s Suleiman Kerimov and China’s Qin Yinglin on the ranking of the world’s 500 richest people.Son’s net worth is $12 billion, which excludes the value of the pledged shares. It has fallen $3.6 billion so far this year and has been one of the more volatile fortunes tracked by Bloomberg.SoftBank spokesman Takeaki Nukii declined to comment on Son’s personal finances.SoftBank has been battling on several fronts this year, including facing pressure from Elliott Management Corp., which called for a special committee to review processes at the Vision Fund, the world’s largest single investment pool for tech startups. Son has responded with a plan to sell about $14 billion of shares in Chinese e-commerce leader Alibaba Group Holding Ltd. as part of an effort to raise $41 billion to shore up businesses battered by the coronavirus pandemic. Son moved ahead after he reportedly considered and then abandoned the idea of taking his conglomerate private.SoftBank also lashed out at Moody’s Corp. this week after its debt was downgraded by two notches, accusing the ratings company of “bias” and “creating substantial misunderstanding.”Some other billionaires are scrambling to meet margin calls on their pledged shares. India’s Gautam Adani and his family put up an additional $1.4 billion of shares as collateral on existing debt this month, and wealth managers like UBS and Credit Suisse have asked clients to post additional collateral.(Updates with Moody’s response in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Multi-Lingual Support From the Global MediXchange of Combating COVID-19 (GMCC) Programme to Further Enable Sharing Among Medical Personnel Worldwide
(Bloomberg) -- SoftBank Group Corp. lashed out at Moody’s Corp. after its debt was downgraded by two notches, accusing the ratings company of “bias” and “creating substantial misunderstanding” days after the investment group announced a $41 billion asset sale program intended to shore up confidence.SoftBank’s shares slid as much as 8.4% early in Tokyo trade. The Moody’s downgrade -- lowering SoftBank’s corporate family rating and senior unsecured rating to Ba3 from Ba1 -- pushed the company deeper into junk territory. It comes at a critical time for founder Masayoshi Son, who this week set in motion his biggest play yet to silence critics and shore up his company’s crumbling shares and bonds.“Such a downgrade, which deviates substantially from Moody’s stated rating criteria, will cause substantial misunderstanding among investors who rely on ratings in making investment decisions,” SoftBank said in a statement, which also asked Moody’s to withdraw the rating.While SoftBank had 1.7 trillion yen ($15 billion) of cash and equivalents on hand at the end of December, it also has a huge debt load: The firm faces 1.68 trillion yen of bonds and loans coming due over the next two fiscal years and a total of about 3.6 trillion over the following four-year period.Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsThe company, which also operates the $100 billion Vision Fund, is vulnerable to economic shocks given that debt, and its ties to unprofitable startups from WeWork to Oyo Hotels. Many of the Vision Fund’s biggest bets lie in what’s known as the sharing economy, which has been particularly hard-hit by the pandemic that’s causing millions of people to stay indoors. Travel spending has slumped as a result.SoftBank is said to be targeting the sale of $14 billion of stock in the Chinese e-commerce leader Alibaba Group Holding Ltd., as well as slices of its domestic telecom arm and Sprint Corp., which is merging with T-Mobile US Inc. But SoftBank risked unloading some of its most prized assets at a discount given the downturn, Moody’s said in its statement.“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” said Motoki Yanase, a Moody’s senior credit officer in Tokyo.Read more: SoftBank Is Said to Plan $14 Billion Sale of Alibaba Shares“SoftBank’s decision to withdraw its corporate and foreign currency bond ratings by Moody’s probably wouldn’t save the company from higher new borrowing and refinancing costs.”Anthea Lai, analyst, Bloomberg IntelligenceThe scale of the endeavor unveiled by SoftBank on Monday surprised investors. Despite several days of gains, however, the stock remains down about 30% from its 2020 peak, underscoring persistent concerns that tumbling technology valuations will damage Son’s company. S&P Global Ratings said this week the asset sales could ease downward pressure on SoftBank’s credit quality.The rout triggered by the coronavirus has spread to credit markets and sparked a surge in the cost of insuring debt against default -- including that of SoftBank, whose credit-default swaps are near their highest level in about a decade. Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.(Updates with share action from the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp.’s Masayoshi Son is continuing to bet on himself, even after he considered and then abandoned the idea of taking his conglomerate private.Son discussed the idea with investors including Elliott Management and the Abu Dhabi sovereign-wealth fund Mubadala in the past week, the Financial Times reported, before moving ahead with a plan to sell assets instead.The Japanese billionaire is backing himself in other ways. A regulatory filing Tuesday shows his stake has risen to 26.9% from 25.5% and, with SoftBank’s shares gyrating wildly, he also pledged more stock against his holdings.Son committed an extra 600,000 shares, or about 0.3% of his holdings, to lenders, the filing shows. It means 38.6% of his stake is now pledged to global banks including UBS Group AG and Nomura Holdings Inc., more than triple the level in 2013.He also loaned 30 million shares -- about 5% of his holding -- to Son Equities, according to the disclosure. The holding company is invested in GungHo Online Entertainment, a gaming firm founded by his youngest brother Taizo Son whose shares have dropped 33% this year, according to data compiled by Bloomberg.The size of Son’s pledges -- 216.9 million shares worth $7.4 billion -- are among the most significant tracked by the Bloomberg Billionaires Index. That amount trails only Larry Ellison, Russia’s Suleiman Kerimov and China’s Qin Yinglin on the ranking of the world’s 500 richest people.“It’s most common among controlling shareholders,” said Michael Puleo, assistant professor of finance at Fairfield University’s Dolan School of Business in Connecticut. The practice is rare right now because of the stock market rout and it is much more expensive to satisfy margin calls, he said. “Banks want nothing to do with high-risk loans.”Largest FortunesSoftBank spokeswoman Hiroe Kotera declined to comment on Son’s personal finances.SoftBank’s shares have tumbled since February with investors concerned about some of its investments.The past week Son began thinking of a leveraged buyout after Gordon Singer of Elliott’s London office expressed interest in buying more SoftBank shares last week, one person said, according to the FT. The plan was eventually abandoned for a number of reasons, including difficulty in getting an investor consortium together so quickly for a large deal, Tokyo listing rules and tax considerations.The regulatory filing doesn’t explain the rationale for Son’s 30-million-share transaction but the shifting of stakes is a reminder of the complex web of relationships that have long underpinned one of Japan’s largest fortunes.When GungHo was spun out of SoftBank in 2015 all the shares owned by Taizo Son’s holding company were pledged to his brother’s Son Holdings, according to a statement at the time. Son has also leveraged his stake in the Vision Fund, which invests in tech startups, including WeWork and DoorDash. That boosts his returns if things go well, with outsize losses if they don’t.Leveraged bets are common among the wealthy, but the marketwide plunge triggered by the spread of the coronavirus is pressuring rich families across the globe, who over the years used share-backed debt facilities. Some are now facing margin calls, adding to broader financial turmoil.India’s Gautam Adani and his family put up an additional $1.4 billion of stock as collateral on existing debt earlier this month. In China, shareholders of at least 14 firms were asked to supply additional shares. The Hinduja family, one of the world’s richest clans with interests in finance, energy and real estate, are repaying debt backed by equity they hold in lender IndusInd Bank Ltd. after a stock rout caused a breach in loan terms.Like Son, SoftBank isn’t averse to pledging its holdings. Its stakes in Alibaba Group Holding Ltd. and SoftBank Japan both include pledged shares.The company’s enormous debt load and ties to unprofitable startups from WeWork to Oyo Hotels through its $100 billion Vision Fund are worrying investors. Other assets like chipmaker Arm Holdings aren’t listed and may prove difficult to monetize quickly. Moody’s Japan downgraded SoftBank’s unsecured debt rating on Wednesday, saying the Japanese investment firm’s plan to sell off assets during a market downturn threatened the value of its entire portfolio. SoftBank responded to the downgrade by saying it was “biased and mistaken.”SoftBank shares have tumbled 27% since Feb. 12, even after soaring this week on Son’s plan Monday to unload 4.5 trillion yen ($41 billion) of assets.The disposal includes the sale of about $14 billion of its shares in prize asset Alibaba. That amount will probably increase, Bloomberg Intelligence analyst Anthea Lai said in a note this week.Even for a billionaire who embraces risk as much as Son, the past few weeks have been tumultuous.At the start of the month his fortune stood at $17 billion. In two weeks it was cut in half. So far this week it has climbed by about 50% as markets embraced his plan.Son may be comfortable with such swings. He saw $70 billion wiped from his net worth in the dot-com crash. But falling fortunes aren’t the only potential downside of pledging shares.“It can get painful for more than one reason,” said Fairfield University’s Puleo. “There’s the loss of wealth but it also creates very negative headlines.”(Updates with Moody’s downgrade in 16th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Benchmarks closed in the negative territory on Monday after lawmakers failed to implement the massive fiscal stimulus designed to ease the economic impact of COVID-19.
(Bloomberg) -- SoftBank Group Corp. plans to sell about $14 billion of shares in Chinese e-commerce leader Alibaba Group Holding Ltd. as part of an effort to raise $41 billion to shore up businesses battered by the coronavirus pandemic, according to people with knowledge of the matter.The Japanese conglomerate is considering raising the remainder of the money by selling a stake in SoftBank Corp., its domestic telecommunications arm, as well as part of Sprint Corp. following its merger with T-Mobile US Inc., said one of the people, who requested anonymity discussing private transactions. The Alibaba stake sale could range from $12 billion to as much as $15 billion, the people said.SoftBank’s shares surged as much as 21% in Tokyo Tuesday in their biggest intraday gain since listing, just days after marking a drop of roughly the same magnitude. The reversal comes as founder Masayoshi Son is finally doing what investors have been urging for years -- using his stake in Alibaba for shareholder returns and to pay down debt.Son has set in motion his biggest play yet to silence critics, unveiling the unprecedented plan Monday to unload 4.5 trillion yen ($41 billion) of stock and alleviate investor concerns that at one point shaved more than 40% off SoftBank’s value from a February peak. The company, which also operates the $100 billion Vision Fund, is vulnerable to economic shocks given its enormous debt load and ties to unprofitable startups from WeWork to Oyo Hotels. Many of the Vision Fund’s biggest bets lie in what’s known as the sharing economy, which has been particularly hard-hit by a virus that’s causing millions of people to stay indoors and slash travel spending.“The market sent a strong message and SoftBank has heeded it,” Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma, said after Monday’s announcement. “What’s changed is that this will entail a meaningful sale of Alibaba stake with much of the proceeds going to shareholders,” he added. “SoftBank has never done that before.”Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsWhile SoftBank didn’t specify which assets would be sold, its Alibaba stake is worth more than $120 billion and makes up the largest chunk of unrealized value. It’s unclear what timeframe SoftBank’s looking at -- its stock in Sprint and Hong Kong shares of Alibaba may be subject to lockup periods: one year from listing in Alibaba’s case and up to several years for Sprint, though certain conditions may allow earlier transfers and the company could employ special vehicles to get a deal done. Alibaba’s stock was up as much as 2.7%, reversing early losses on Tuesday in Hong Kong.An Alibaba spokesperson didn’t respond to an emailed request for comment. SoftBank spokespeople in Tokyo and the U.S. declined to comment.SoftBank’s Fire Sale May Erode Stake in Alibaba: Tim CulpanThe Japanese company’s envisioned asset sale would almost match its entire market value last week. Part of the proceeds would go toward a new share buyback program of as much as 2 trillion yen that comes on top of previously announced repurchases.The scale of the endeavor surprised investors and sent SoftBank soaring. Yet even after Monday’s and Tuesday’s combined gain, the stock remains down about 33% from its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.The coronavirus-triggered rout has spread to credit markets and sparked a surge in the cost of insuring debt against default -- including that of SoftBank, whose credit-default swaps touched their highest level in about a decade. Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.Alibaba, Sprint and SoftBank Corp. are worth as much as $190 billion combined, estimates Atul Goyal, senior analyst at Jefferies Group. But Son will want to keep at least a 50% stake in the domestic telecom unit because it’s the only cash-generating asset and its dividends help pay for SoftBank’s interest on debt, he wrote. And since Sprint is going through a merger with T-Mobile, most of the funds will initially have to come from Alibaba, he said.“This buyback is music to our ears,” Goyal said. “But the timing of this announcement is not ideal. We would have ideally preferred such an announcement from a position of strength and not because the SBG stock came under tremendous pressure.”(Updates with Alibaba’s shares from the third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.