SoftBank's Slide Leaves It Worth Less Than Stake in Alibaba

  • SoftBank declines for fourth straight day on Sprint tumble
  • Sprint at a two-year low amid doubts it can pay down debt

SoftBank Group Corp. tumbled below the value of its stake in Alibaba Group Holding Ltd. amid growing concerns about the Japanese company’s other assets, including struggling U.S. wireless carrier Sprint Corp.

SoftBank’s market capitalization fell to 5.46 trillion yen ($46.7 billion) after a four-day stock slide triggered by rising pessimism about Sprint’s ability to pay down debt. The Tokyo-based company’s stake in Alibaba is worth about $56 billion, according to its own website.

Billionaire Masayoshi Son has struggled to turn around Sprint since buying a controlling stake in 2013 for SoftBank’s biggest acquisition ever. The wireless operator lost its place as the third-largest U.S. carrier to T-Mobile US Inc. and its stock this week fell to the lowest level in more than two years and its bonds led declines among junk-rated debt Wednesday.

“It’s symbolic because it tells you that investors feel SoftBank has been destroying value,” said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. in Singapore. “Son’s pride has been another major issue, which pushed him to where he is now.”

Potential Writedown

In 2013, SoftBank paid $22 billion for a controlling stake Sprint before later acquiring more stock. Its investment in the Overland Park, Kansas-based carrier is now worth about $8.2 billion, according to its website.

At the time of the initial deal, Son touted the potential role for Sprint as he pursued his 300-year plan for SoftBank and goal of building an Internet empire unrivaled in “profit, cash flow and market value.”

Instead losses at Sprint have mounted and customers have fled while SoftBank has found itself saddled with about $100 billion of debt, according to data compiled by Bloomberg.

SoftBank’s market value has dropped by 1.9 trillion yen this year and the company has said it may book a charge of as much as $1.2 billion related to the Sprint deal when it reports earning next month. Shares of SoftBank fell 3.2 percent Thursday, extending this week’s rout to 18 percent.

“SoftBank’s growth potential is below Alibaba’s and its other businesses are looking relatively weak,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Son said a V-shaped recovery is unlikely for Sprint, so that will weigh on SoftBank’s value for a while.”

Moody’s Investors Service lowered Sprint’s credit rating in September to B3 from B1, or six levels below investment grade, citing "brutal competition" in the U.S. wireless industry that will pressure even the strongest operators. The ratings firm also cast doubt on the wireless company’s ability to refinance more than $12 billion of debt coming due in the next five years without additional support from its majority shareholder -- SoftBank Group.

SoftBank lists the value of holdings in nine other public companies on its website, including Sprint and Yahoo Japan Corp. The company calculates the total market value of those holdings as more than 8 trillion yen.

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