The decline recorded in the tech stocks in the past week appears to have spiked fears amongst SoftBank’s investors.
The shares of Japanese multinational conglomerate holding company SoftBank Group Corp (TYO: 9984) have plunged by about 7% amid upturned stock bets which unnerved the company’s investors. The conglomerate’s bets on equity derivatives pegged to listed technology companies have made the investors uncomfortable amid the incessant market decline.
As reported, the Chief Executive of SoftBank Group Masayoshi Son has a wild risk appetite when as it relates to tech stocks and has committed billions of dollars to such companies including Amazon.com Inc (NASDAQ; AMZN). Of the aggressive bets made by SoftBank, options of $4 billion were reported to generate exposure of about $50 billion, while the group has made about $4 billion in trading gains from those bets, the Financial Times reported.
The recent reactions of investors have sent the SoftBank Group’s stock to trade below 6000 yen for the first time in 2 months to 5,881 yen. The group was the biggest loser in percentage terms on the benchmark index, which closed down 0.5%.
SoftBank Tagged ‘Nasdaq Whale’ Amid Stock Bets
Coinspeaker reported on Monday that the SoftBank Group has been tagged Nasdaq whale stocking tech rallies by buying options. According to those familiar with the matter, through its $100 billion Vision Fund, SoftBank has invested nearly $4 billion in shares of Amazon.com Inc, Microsoft Corporation (NASDAQ: MSFT), and Netflix Inc (NASDAQ: NFLX). Besides, SoftBank purchased a stake in Tesla Inc (NASDAQ: TSLA).
The obvious bets by the SoftBank Group have garnered comments from analysts from Wall Street. Peter Boockvar, chief investment officer at Bleakley Advisory Group, commented:
“It’s just a trip to the casino. If they’re supposed to be an investment company taking a long-term horizon, then trying to juice your short-term return through options, you’ve turned into a hedge fund. We’ll see if they’re reversing it. A lot of the call buying was an upward lift to the market. The sellers of those calls then had to buy stocks and hedge and it becomes a self-fulfilling prophecy on the upside”.
Besides the aforementioned stocks, SoftBank has invested in other key startups including WeWork which it committed about USD1.1 million earlier in August. As a furtherance to the companies aggressive investment drive, the company has been linked with Walmart Inc (NYSE: WMT), one of the top firms in the race to acquire embattled TikTok.
Why Unnerving Investors Is Not Strategic
The decline recorded in the tech stocks in the past week appears to have spiked fears amongst SoftBank’s investors. While the situation has partly offset the company’s earnings, the company must seek ways to placate the investors as a continued decline in the stock price will aggravate the harsh conditions ushered in by the coronavirus pandemic.
“When there is a tech bubble, Masayoshi Son is usually not too far away from the action,” as Amir Anvarzadeh, market strategist at Asymmetric Advisors, wrote in a note. Moving forward, a soft-pedaling of these aggressive moves may help to forestall imminent price plunges when the market experiences a little downturn.
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