A stock and a hard place: SoftBank's US$150 billion Alibaba war chest in spotlight

SoftBank CEO Masayoshi Son threw cold water on Wednesday on the idea of cutting his firm’s US$150 billion stake in e-commerce giant Alibaba, after prominent activist investor Elliott Management called for big buy-backs.

The emergence of New York-based Elliott as a SoftBank shareholder has renewed focus on the company’s 26 per cent stake in China’s Alibaba, the Japanese firm’s biggest asset and Son’s most successful tech bet to date. (Alibaba is the parent company of the South China Morning Post.)

Elliott, one of the world’s best known activist investors, has amassed a holding of almost US$3 billion in SoftBank. It is now pushing for changes, including US$20 billion in stock buy-backs, sources have said. But Son indicated that he is in no rush to sell down the Alibaba shares – raising questions about how SoftBank could fund any potential buy-backs.

“I believe Alibaba has lots of room to grow. I’m in no hurry to sell shares,” he told a news conference on Wednesday.

SoftBank is already highly leveraged and struggling to attract outside money to a second tech fund. Son’s reluctance to sell down the holding in Alibaba leaves little scope for buy-backs on the scale Elliott wants, analysts said.

“From a shareholder perspective you should sell it and invest in the things that are going to generate returns,” said Kirk Boodry, an analyst at Redex Holdings who writes on research platform Smartkarma.