Softbank fell 8 percent in Tokyo on Monday after Japan’s organization was found to be a secret “whale” that has been in the U.S. for a while. Technology stocks were at record highs.
The Financial Times reported on Sunday that the group’s trading strategy means that founder Masaoshi Soni is now sitting on earnings of around b 4bn after making an aggressive bet on equity derivatives.
Tokyo traders said the report has helped crystallize the perception among some investors that Softbank’s behavior as a company is increasingly resembling a hedge fund, a population of former investment bankers with an appetite for risk.
Shares of Softbank fell 5.4 percent in the first half hour before continuing their decline as the session progressed. The second-largest component of Softbank is the benchmark Nikkei 225, down 0.3 percent, according to Bloomberg data. The stock had risen 33 percent this year before falling on Monday.
Softbank shares slide after a two-day decline on the Nasdaq last weekend.
It also warns Nomura’s Japan equity strategist, UNOSUK Ikeda, that early September could lead to a massive sell-off in tech stocks in Tokyo as institutional investors return from vacation and unload excess stocks through summer options. Purchased by individuals.
Fund managers said retail investors, who have a 30 per cent stake in Softbank’s shareholder registry, were particularly negative about the change in the company’s investment strategy.
Naoki Fujiwara, fund manager at Tokyo-based Shinkin Asset Management, said: “Many institutional investors who understand how options work do not expect any major impact on Softbank’s earnings.” But retail investors who support Softbank are “worried that the derivatives business will again make big losses.”
Softbank’s high-risk strategy has been in place over the past few months, according to people with direct knowledge of the matter. Options focused on tech stocks cost about 4bn on premiums.
In total, it has come up with a fictitious exposure of about $ 30 billion using call options – stakes on rising stock prices that provide the right to buy shares at a preset price at a future date. Some of these positions have been set by other contracts purchased as hedges.
Softbank declined to comment.
Softbank’s preferred U.S. Working now due to the huge derivatives bets on stocks, even though the Japanese group is still in unrealistic profits, the constant pullback in equity markets could reduce returns.
Meanwhile, Softbank’s domestic market analysts said some parts of the Tokyo Stock Exchange are trading in the US. Technology stocks warned of a sharp sensitivity to the broader route.
Over the summer, Japanese retail investors flocked to tech and game stocks, pushing the small-cap mother’s market to a two-year high. Analysts say many of those names may now be sensitive.
