By Dhirendra Tripathi
Investing.com – Alibaba ADRs (NYSE:BABA) traded 3.8% lower in premarket Monday as the company’s registration of a large number of American depositary shares with the Securities and Exchange Commission Friday indicates that a big shareholder, most likely Softbank (T:9984), is preparing a block sale.
According to the filing last week, the Chinese internet giant applied for registration of an additional 1 billion ADSs, each representing eight ordinary shares.
SoftBank invested in Alibaba before its initial public offering. A large portion of its holdings in the company are thus not registered as ADSs, Citigroup (NYSE:C) analysts wrote in a note.
The Alibaba filing with the SEC will allow the company’s stockholders whose weren’t registered with the SEC the option to sell the shares, Citi said. The registration could also cover the company’s need to issue new shares for the employee equity incentive plan, according to Bloomberg.
SoftBank owns 5.39 billion Alibaba shares, equivalent to 673.76 million ADSs, or a 24.8% stake, according to calculations by Citi analysts. Alibaba registered about 2 billion ADSs when the company conducted its IPO in the U.S. in 2014, Bloomberg said.
SoftBank reports earnings Tuesday. It has used buybacks to bolster its own stock. Alibaba is by far its most valuable holding.
The Japanese investment firm has seen the value of its portfolio companies fall significantly amid the tech meltdown of the last few months. These include Didi Global (NYSE:DIDI), One 97 Communications (NS:PAYT) and DoorDash (NYSE:DASH). Didi trades at less than a quarter of its IPO price while One 97 has more than halved in less than three months since its public debut.