Alibaba’s application to the SEC may talk about SoftBank selling its vast stake
Alibaba’s (BABA) shares fell 4.7% before trading on Monday. Citigroup analysts note Alibaba’s application to the SEC to register one billion American Depositary Shares. In addition, new shares on Friday may indicate a potential sale by a significant investor, SoftBank, of its stake, which the bank acquired before Alibaba’s IPO.
Chinese technology giant Alibaba on Friday filed an application with the Securities and Exchange Commission (SEC) for the registration of 1 billion American depositary shares (ADS). This move opens up the possibility for investors to sell shares of the company that were not previously traded on the American market, for example, shares registered in Hong Kong or owned before Alibaba went public.
According to analysts at Citigroup Bank, which also owns a stake in Alibaba listed on the NYSE in the United States, the registration of Alibaba ADS represents shares worth more than $120 billion, which may soon -be in the United States. Such a large amount may signal the impending departure of a prominent investor.
Analyst Alice Yap from Citigroup believes that this investor is most likely a large investment bank SoftBank, which owns almost 25% or more than 673 million American shares of Alibaba and invested in the company before it became public.
Over the past year, SoftBank has suffered due to the depreciation of its assets in Chinese technology stocks, especially Didi Global (DIDI), One 97 Communications, and DoorDash. SoftBank shares listed on the Japan Exchange Group (JPX) have fallen by about 50% compared to last year’s peak due to a decline in asset values.
Alibaba is by far SoftBank’s most valuable asset. The bank reports quarterly profit and earnings on Tuesday, February 8. In addition, Alibaba will publish the profit and revenue results for the 3rd quarter of Fin. 2022 (ended December 31, 2021) today before the opening of trading. Calendar of quarterly reports.
Sell or buy Alibaba shares?
SoftBank’s sale of its significant stake would contradict the recent trend of investors buying Alibaba shares.
So, Charlie Munger, deputy chairman of Warren Buffett’s Berkshire Hathaway (BRKB, BRK.A, BRK.B), has made headlines over the past year thanks his big bet on Alibaba shares. Munger doubled his investment in Alibaba at the end of 2021 for the second quarter in a row because he considers them first-class and undervalued.
At the same time, most investors are afraid to invest in shares of Chinese technology companies, given their substantial decline amid the risks of delisting from American exchanges and tightening of Beijing’s regulatory rules. In addition, China’s National Bureau of Statistics (NBS), in its e-commerce sales reports for November and December, reported a slowdown in growth.
Be that as it may, the average estimate of Wall Street analysts of Alibaba shares boils down to a “Strong-Buy” rating. In January, Needham analysts also confirmed the “Buy” rating, citing the company’s long-term prospects. Moreover, the average target price remains bullish: $188.79 against Friday’s closing price of $122.22 indicates a forecast growth potential of 54.5%.
