A Softbank spokesman declined to comment on the news, but stock market investors may have started to worry. On Wednesday, Softbanks Tokyo listed shares turned lower in early trading, falling nearly 1.3% and closing down more than 0.6%. In early trading, the shares of super soft silver in the US market fell 2.6%.
If the above news is true, it means that Softbank will give up its controversial investment in derivatives of Softbanks technology stocks.
In September this year, the media broke the news that Softbank gambled heavily on technology stocks, saying that Softbank bought technology stock options linked to nominal value of $50 billion, which once brought about short-term floating profit of about $4 billion. Wall street people see these options as the driving force behind the tech boom in the second quarter. Softbanks market value has since evaporated as much as $17bn, as investors worry about huge losses from Softbanks derivatives trading.
In October, the media also heard that although it had considered reducing its position, Softbanks public stock trading unit had expanded its stock position to more than $20 billion. That may be well above the target, as Softbanks target of more than $10 billion was unveiled in August.
Although Softbank did not respond to the news of the increase, some market participants found that on October 2, an unknown investor paid about $180 million to buy the call options of four major technology stocks of Fang, namely, Netflix, Amazon, Facebook and Googles parent company alphabet, which will expire in January and March next year. The nominal value of the options is about $1.7 billion. On April 2, the Nasdaq 100 index hit its biggest one-day gain since April this year, and options related volatility measures also rose. Many analysts speculated that the investor is Softbank.
NASDAQ whale almost lost all derivatives returns of Softbank in the first half of the year
Judging from the data released recently, investors must have been dissatisfied with the performance of NASDAQ whale.
In early November, Softbank disclosed to the media that by the end of the third quarter, sbnorthstar, its investment technology unit, had accumulated trading losses of $3.7 billion, including $900 million of unrealized impairment losses caused by investment. This almost offset what the vast majority of the media said in September was a $4 billion profit.
Softbank disclosed that as of September 30, sbnorthstar had purchased nearly $17 billion of U.S. technology stocks, including Amazons $6.3 billion position, Facebook $2.2 billion, zoom and alphabet $1.8 billion and $1.4 billion, respectively. Sbnorthstar also has $3.4 billion in equity derivatives, including $4.7 billion in call options at the end of September. In addition to betting on a rise in share prices, the agency also had put options, which recorded a Book loss of $2.7 billion due to the rise in the third quarter.
In October, sbnorthstar borrowed $6 billion on Alibaba shares.
Due to the trading performance of sbnorthstar, Softbank lost 292 billion yen (2.8 billion U.S. dollars) in derivatives investment in the third quarter, nearly flattening all the profits in the first quarter, with a net profit of just over $1 million in the first half of this year. Given the surge in technology stocks after the outbreak, the payoff is surprising.
Sun Zhengyi supports investment in technology stocks
When you talk about derivatives, it sounds risky, but it only accounts for 1% of the total value of our assets, Sun said in a conference call after Softbanks third quarter results were released. (if these investments fail), the loss is only 1% - 2% of Softbanks total equity, so it is only a small part of the overall situation.
On November 17, sun Zhengyi continued to correct the name of Softbanks investment strategy in science and technology industry, believing that it is necessary to invest in enterprises that were successful during the AI revolution. He also revealed that Softbank has gained $80 billion by selling Alibaba shares and other assets this year. With these cash in hand, Softbank can buy back shares more actively and continue to invest in enterprises if its share price falls.
Whether or not he insists on investing in technology stocks while abandoning NASDAQ whale, sun Zhengyi is inseparable from the success or failure of sbnorthstar.
Sbnorthstar is registered in the Cayman Islands, and its investment committee has three members, namely, former Deutsche Bank trader Akshay naheta, Softbank founder and CEO sun Zhengyi, and Softbank vice chairman Ron Fisher. Although the actual manager is naheta, Mr. Sun is the driver of the agencys investment in US technology stocks. Mr. Sun once told investors that he was deeply involved in the relevant trading operations.
Sun Zhengyi himself owns one-third of sbnorthstar. According to the media, in a conference call after the third quarter earnings report, several analysts and fund managers questioned Mr. Sun, saying that his shareholding worried about the companys management. Sun denied that there was a conflict of interest, saying that he was paid for his investment expertise and that other fund managers also charged for it.