Alibaba’s largest shareholder, SoftBank, will reduce its stake in China’s e-commerce giant. Alibaba announced on the Hong Kong Stock Exchange about SoftBank’s decision on August 10.

According to Reuters, the Japanese firm will lower its stake in Alibaba from 23.7% to 14.6% by a physical settlement of certain prepaid forward contracts.

A prepaid forward contract is a trading strategy that allows a large shareholder to receive a sum of cash from a counterparty while deferring the taxes owed on the capital gains.

By cutting its stake in Alibaba, the deal is expected to bring $34 billion (about 4.6 trillion yen) in cash for SoftBank.

According to the information released by SoftBank, the settlement will begin in mid-August 2022 and is expected to be completed by the end of September.

SoftBank suffered a $50 billion loss from its flagship Vision Fund investment business for the first six months amid a tech market downturn. Its CEO Masayoshi Son vowed to reduce investment activity and cut costs.

SoftBank’s Vision Fund is the world’s largest venture capital fund with over 150 billion dollars that focus on the technology sector. 

Besides Alibaba, the fund has invested in well-known companies like Uber or Didi. Masayoshi Son invested in Alibaba for $20 million in 2000. As the Chinese tech firm gradually grew into one of the world’s biggest e-commerce companies, Son has secured his reputation in technology-focused venture capital investment.

However, under Beijing’s recent crackdown, Alibaba has lost over two-thirds of its market value from highs in late 2020.

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