With Alibaba’s stake reduced, SoftBank’s son is cooling off on Chinese technology.

Son was once one of the biggest cheerleaders in the business and Alibaba is his most famous bet, hugely profitable and, to his fans, symbolic of his foresight and sense of investment.

Amid a steep market decline, however, Son will reduce its conglomerate’s stake in Alibaba from 23.7% to 14.6% by settling prepaid futures, although the Chinese firm will remain SoftBank’s biggest asset.

“It looks like they’re saying ‘we think the outlook for Chinese tech is pretty bad, so we’re going to take the lead,'” Redex Research analyst Kirk Boodry said.

Tensions between Washington and Beijing have exacerbated the difficulties of Chinese tech companies after a regulatory crackdown that began in late 2020.

Alibaba has been added to the US Securities and Exchange Commission’s delisting watch list over a dispute over audit compliance issues for US-listed Chinese companies.

The bleak outlook for the Chinese economy, as Beijing pursues a zero COVID policy that has driven strict lockdowns, hasn’t helped either. Since the regulatory crackdown, Alibaba shares have fallen more than two-thirds to value the company at $250 billion.

“We have to watch the policy of the (Chinese) government carefully and not be reckless,” Son told shareholders in June.

Mr Son’s pushback contrasts with his earlier optimism about Chinese technology, which saw him pour $12 billion into road haulier Didi through the first $100 billion Vision Fund, which also made sizable investments in Uber and office space company WeWork.

Didi angered Chinese regulators by going ahead with a New York initial public offering and is now trading on the over-the-counter market after being delisted.

SoftBank was forced to reduce the valuation and, after a series of high-profile reversals, Son reduced the size of individual investments made through a second, smaller fund.

By the end of June, SoftBank had recorded a gross investment loss of $9.3 billion on Didi.

SoftBank’s other Chinese bets include Full Truck Alliance and JD Logistics.

The conglomerate is also the largest shareholder in AI company SenseTime, which has been blacklisted in Washington for human rights concerns.

Shares of Sensetime fell by nearly half as a lock-up period expired at the end of June.

This week, SoftBank announced it had exited KE Holdings, which operates Chinese real estate platform Beike, at an average price per share of $23.89, down from a cost price of $12.91.

The conglomerate has pledged to preserve cash and cut costs as it posted a $50 billion loss in its Vision Fund investment arm in the six months to the end of June.

TikTok operator ByteDance is also an investment and has been highlighted as one of eight assets in the first Vision fund with upside potential.

The Beijing-based company, which has come under intense scrutiny in the West over its handling of user data, does not yet have a timetable for its long-awaited IPO, Reuters reported earlier.

Alibaba “is the only ‘representative mega-earning’ investment in the portfolio at the moment,” Quiddity Advisors analyst Travis Lundy wrote in a post on Smartkarma.

Without it, SoftBank is “less attractive because very little of the portfolio now reflects some sort of ‘special sauce’ of forward-thinking investing,” he wrote.

For now, however, using the capital to buy SoftBank’s own stock is a priority for Son. The company announced a 400 billion yen ($3 billion) share buyback in addition to the current 1 trillion yen program which is due to expire in November.

Shares of SoftBank closed up 5.6% on Friday, the first day of trading after announcing the deal with Alibaba late Wednesday.

($1 = 133.2000 yen)

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