SoftBank value slumps as investors fear it may be the 'Nasdaq Whale'

The value of the Japanese technology investor SoftBank slumped by about £7bn on Monday after shareholders were spooked by reports that the company has been making huge bets on US technology firms listed on a US stock exchange.

Over the weekend, SoftBank, which is best known for investing in young technology businesses, was reported to be the so-called “Nasdaq Whale” whose massive punts were behind US technology stocks moving to record highs before slipping back at the end of last week.

By the middle of last week, the US equity market had rallied by about 55% since March. In particular, tech giants such as Amazon, Apple, Facebook and Google have seen their share prices soar.

SoftBank’s moves in the market appear to have succeeded in the short term, with the company said to be sitting on trading gains of about $4bn (£3bn) after a series of colossal bets on equity derivatives by the group’s founder, Masayoshi Son.

However, the change in strategy is viewed as high risk and appears to have scared investors, who fear that markets could switch and leave the company nursing painful losses.

About 30% of SoftBank shareholders are retail investors who are still recovering from some of the investment company’s high-profile failures over the past year, having invested heavily in the likes of the office space provider WeWork, which it ended up rescuing last year, and the payments group Wirecard, which filed for insolvency in the summer amidst a £1.7bn alleged accounting fraud.

Softbank is believed to have bet $4bn on call options focused on individual US technology stocks. A call option is a financial derivative that gives the owner the right to buy a share at a pre-agreed price – but the trade can help drive up the value of the real stock market as the sellers of the options buy the underlying shares.

READ  Why is it so difficult to stop your pension money making the climate crisis worse?
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Shares in SoftBank closed down 7.2% on the Tokyo exchange. US stock markets were closed on Monday because of the Labor Day holiday. Before Monday’s drop, SoftBank’s shares had climbed by about a third this year.

Softbank declined to comment.


Leave a Reply