Alibaba Stock News and Forecast: BABA opens up 3% higher following Softbank exit
- Softbank entered into forward contracts that should dispose of $7.2 billion worth of BABA stock this year.
- Softbank will own about 3.8% of Alibaba once the sale is completed.
- BABA stock rose since investors think the major part of selling by Softbank may soon be over.
- Alibaba stock remains in a downtrend on the daily chart
Alibaba (BABA) stock opened 2.9% higher at Thursday’s opening bell despite what many took as bearish news that longtime investor Softbank has sold off most of its remaining stake in the Chinese conglomerate. The sale comes at a time when Alibaba has decided to break up into six smaller companies with expected separate IPOs.
The NASDAQ rose 0.7% to boot, so after Wednesday’s pullback the market is in recovery mode.
Alibaba stock news: End of a selling era for Softbank
Masayoshi Son’s Softbank famously made a $20 million bet on Alibaba back in 2000. At its IPO in 2014, the roughly 24% stake was worth about $60 billion. At Alibaba’s all-time high in late 2020, Softbank’s stake was worth about $200 billion, but the Chinese ecommerce king and now conglomerate made up of a multitude of businesses lost roughly 75% of its value since then. Though the downfall for the stock began with Chinese regulators cancelling former subsidiary Ant Group’s proposed IPO due to criticism from founder and CEO Jack Ma, a not insignificant amount of the pullback in the stock has come from Softbank reducing its stake.
The Financial Times has reported that following its sale of $29 billion worth of BABA stock in 2022, Softbank has already traded about $7.2 billion worth of the company this year alone. The trade was conducted via forward contracts that allow Softbank to repurchase the stock, but in the past Softbank has used this method to let go of shares. After the disposal of the $7.2 billion stake, Softbank will only own about 3.8% of the firm.
Softbank claims that the selling is due to the weakness in other investments in its Vision Fund, which lost a boatload due to the failed IPO of WeWork and other investments. In related news, Netherlands-based Prosus, which is controlled by South Africa’s Naspers, moved about 1% of Tencent’s (TCEHY) total shares to the Hong Kong Central Clearing & Settlement System this week. This is typically done in order to begin selling the shares in the open market. Prosus has reduced its stake in Tencent from 29% to 27% over the past year.
Despite BABA stock tanking in Hong Kong, the US-based shares are moving higher as it appears that Softbank’s enormous selling will soon be over or at least wil be less massive in the future. That should allow the stock to rebound finally after a 2-year sell-off.
Alibaba stock forecast
Despite the advance on Thursday, BABA stock still looks to be in a downtrend. The stock could not make it above the long-term resistance shelf from $103 to $105.32, which has witnessed selling on a number of occasions over the past year. With the Moving Average Convergence Divergence (MACD) indicator looking like it will soon crossover in a bearish fashion, expect BABA to fall to late March’s support shelf at $85.70. A break above the 9-day moving average (blue) would change my mind.
BABA daily chart