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Trapped, hands practically in the bag. “SoftBank Unmasked as ‘Nasdaq Whale’ That Stoked Tech Rally”: ‘SoftBank unmasked as’the Nasdaq whale‘that unleashed the technology rally’: is the title of the article in the Financial Times, which recounts the trick committed by SoftBank.First of all, it is good to clarify the protagonists of the story. SoftBank is a Japanese investment firm that, in recent years, has been doing big bets on start-ups from the technology sector, through the Vision Fund, worth $ 100 billion.
Its role, in buying Silicon Valley shares, has long been known and demonstrated through documentation that demonstrates how the group, over the years, has decided to move away from the telecommunications sector and focus instead on on strategic investments in first-year tech students of the caliber of Uber and WeWork.
However, rumors reported over the weekend by the Financial Times and the Wall Street Journal revealed the enormous scope of the bets launched by the founder. Son Masayoshi, which in recent years would have embarked on a massive derivatives trading. How? Through a strategy called “Positive gamma” with which he would buy individual shares of high-tech and Internet companies, and then, in a sense, inflate them himself, buying purchase options on the same securities.
Since these are call options, here we are talking about derivative instruments that give their buyer the right to buy securities on a certain date and at a certain price. Obviously, the profit is realized and increases when, at the time of purchase, the security is negotiated in the market at a value higher than the price agreed in the option contract: in this way, those who bought the purchase option you can buy the shares at a lower price than you would have to pay if you bought the shares on the stock market.
Softbank and the purchase of $ 4 billion call options on the Wall Street titans
According to the Wall Street Journal, Softbank would have bought $ 4 billion in options related to previously accumulated securities, of the caliber of Amazon (AMZN), Microsoft (MSFT) and Netflix (NFLX). Citing unidentified sources, the newspaper reported that the options generated approximately $ 50 billion in exposure.
Both the WSJ and the FT (the Financial Times was the first newspaper to report the story) have suggested that SoftBank’s options would have determined part of the recent Wall Street rally, leading to both Nasdaq Composite che the S&P 500 to sound continuous record values, almost daily, thanks to the strong impact that, on the charts, is represented by a handful of technology stocks (read FANGMAN)
Suffice it to say that some stocks that have also proven historical records impact the S&P 500 to a quarter of its value. The FT described the Japanese holding company strategy as a “dangerous” gamble.
“These are among the most important commercial operations that I have witnessed in the last 20 years of activity – commented the manager of a hedge fund that focuses on derivatives trading – The flows are enormous.”
In the planshigh finance Something strange, to be precise, the strong rebound in call option purchases had already been noticed in recent weeks, given the presence of mysterious trade operations that, according to many, would exacerbate the call. melting occurred during the summer, of various technological actions.
A recent report from Goldman Sachs reported the FT He cited, in particular, that the total face value of call options issued on individual US securities stood at $ 335 billion in the past two weeks, more than triple the average for the period from 2017 to 2019.
The retail boom has certainly played a role in the euphoria that has hit Wall Street, but those in the know have pointed out that the size of the latest option buys that have poured into the market was too large to have been driven. give him retail investitori.
In addition to size, “the aggressiveness of the mysterious call buyer, combined with the tired phase in typical summer trade, was a major factor in not only triggering the rise of many Big Tech names, but also rise in the US stock market“According to Charlie McElligott, Nomura strategist, to the British newspaper.
“Wall Street is still in danger, and those flows are still there.” And anyway, aside from the rumors, there is also the data. The FT reports that, according to the documents presented to the National Stock Market Commission Last month, SoftBank bought nearly $ 2 billion in shares of Amazon, Alphabet, Microsoft, and Tesla; Investments whose purchase was financed in part with the cash that the Japanese holding company raised with the $ 41 billion asset sale program launched by the collapse of its prices, during the market earthquake caused by Covid-19.
This sale of assets was decided as part of the plan announced by the group last March. with the intention of raising 4.5 trillion yen, the equivalent of $ 42 billion. The collapse of the Softbank stock was inevitable, which fell on the Tokyo Stock Exchange more than 7% in today’s session, with $ 8 billion of market value vanished.
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