Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

(Updated )

SoftBank President Nikesh Arora wants to turn his company into a pool of permanent capital.

That's tough to do without capital.

Tuesday's announcement that SoftBank will sell up to $7.9 billion worth of shares in Alibaba is a well-timed move to build the pile of cash Arora needs.

Some investors may take the transaction as commentary on Alibaba's prospects amid a myriad of struggles. In fact, it's far more about the challenges Arora faces than those Jack Ma is dealing with.

To make the big bets Arora envisions, and that could take decades to pay out, he needs a lot more cash than what's currently on hand, especially in the face of continued troubles at U.S. operator Sprint, which remains one giant albatross.

Cash Is King
SoftBank's current liabilities are approaching the level of current assets
Source: Bloomberg
Note: Dates are fiscal quarters.

With short-term liabilities rising faster than SoftBank's ability to generate cash, the Japanese company's working capital -- current assets less current liabilities -- has dipped to the lowest in three years. If it raises the full amount stated, that figure would almost triple to about $11.3 billion.

Arora doesn't want to dabble in minuscule $5 million to $50 million investments. Instead, he's keen to write $1 billion checks, with time horizons of more than seven years. Chairman Masayoshi Son took one of the first savvy steps toward helping him realize that vision in March when he announced a split of the company into domestic and overseas divisions, giving Arora the freedom to play in the very large sandpit of international startups.

Fat checks, of course, require fat check books. While Alibaba is the largest company in SoftBank's stable, it's also one of the most liquid. There's not much else in its line up -- which includes Sprint, Yahoo Japan, its own local telecom operator, Coupang and GungHo -- that could be tapped as easily.

What that also means is that although the cut in SoftBank's Alibaba stake is relatively small -- 32 percent down to about 28 percent -- investors should expect Arora to tap that barrel a few more times.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects name of SoftBank's investment companies in eighth paragraph.)

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net