Goldman Sachs Surprised By Alibaba-Softbank News, But Still Buying The Stock

SoftBank Group Corp has announced plans to sell a part of its stake in Alibaba Group Holding Ltd BABA. Goldman Sachs’ Ikuo Matsuhashi maintained a Buy rating for the company, with a price target of ¥7,800.

Softbank now owns a 32.2 percent stake in Alibaba, including indirectly held shares. After the transactions, the stake would fall to 28 percent, analyst Ikuo Matsuhashi mentioned. Alibaba plans to buy back US$2bn worth of its own shares from Softbank, which intends to sell US$0.9bn worth of shares to members of the Alibaba Partnership and a major sovereign wealth fund.

A newly formed Mandatory Exchangeable Trust would be issuing US$5bn in mandatory exchangeable trust securities, which would give initial buyers the option to purchase an additional US$1bn.

Softbank indicated that the main aim of the transactions was to strengthen its balance sheet, and also maintain its strong partnership with Alibaba.

Take On The Proposed Transaction

Although Softbank management has indicated its plans to make new investments and exit those made earlier, many had not expected Softbank to “move so quickly in terms of selling a stake in Alibaba given many market observers still believe that the latter has upside,” Matsuhashi wrote, adding that the announcement came as a surprise.

The analyst commented that this decision was not indicative of at a change in circumstances at Sprint Corp S, since Softbank management had recently expressed confidence in an improvement in Sprint’s earnings.

“We take a positive view of Softbank being prepared to exit even core stocks in its portfolio without exception depending on conditions,” Matsuhashi stated.