Here’s Why Softbank Is Selling Off $7.9 Billion in Alibaba Stock

Chinese online retail giant Alibaba founder Jack Ma smiles as he waits for the trading to open on the floor at the New York Stock Exchange in New York on September 19, 2014.
Photograph by Jewel Samad — AFP/Getty Images

Softbank said it will sell at least $7.9 billion of shares in Chinese e-commerce giant Alibaba as it looks to raise capital.

Shares of Alibaba (BABA) were down more than 2% in extended trading on Tuesday after Softbank (SFTBY) announced its plan to sell the shares for the first time since investing in the company in 2000.

Softbank will hold about 28% of Alibaba after the sale, the company said on Tuesday.

As of March 31, Softbank held a 32.2% stake in Alibaba.

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Softbank said it will form a trust that will offer $5 billion in securities that can be exchanged into Alibaba shares in three years.

Alibaba will buy $2 billion of its shares from Softbank, and intends to fund the deal with cash on hand, Alibaba said. The company’s partnership will buy another $400 million of shares.

Softbank Chairman and Chief Executive Masayoshi Son will remain a director at Alibaba, while Alibaba Executive Chairman Jack Ma will remain on the board of Softbank.

In connection with the transaction, Softbank also entered into a lockup agreement with Alibaba under which it will not transfer any Alibaba shares held by the company for six months.

It was not immediately clear if the sale has any impact on Yahoo’s (YHOO) stake in Alibaba.

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