Softbank Plans To Sell Its Nvidia Shares Early Next Year Due To A Sharp Fall In Share Price

On December 12th, Bloomberg quoted sources as saying that Softbank plans to sell its Nvidia shares early next year. Recently, Nvidia's share price has fallen sharply.

Sources said Softbank may benefit $3 billion from the deal. However, Softbank has not yet made a final decision and may continue to retain these shares or sell only a portion of the shares.

A spokesman for Softbank and Nvidia declined to comment.

According to sources, although Softbank still holds shares in Nvidia, the company has established about $6 billion in so-called "lead deals." This kind of transaction allows investors to protect themselves from stock price falls while accumulating shares. Softbank has reached an equity deal with the investment bank to hedge against the decline in Nvidia's share price.

For most of this year, NVIDIA's share price has been rising due to a number of factors, including the development of artificial intelligence and cryptocurrency mining. However, due to Sino-US trade disputes, as well as weak market demand and growth prospects, NVIDIA's share price has fallen by 48% since its peak on October 1.

The news said that such a fall in stock prices led Softbank to tend to reduce its stake.

At 1:20 pm local time on Tuesday, NVIDIA shares fell about 2% to $149, with a market capitalization of about $90.9 billion.

According to sources, Softbank’s opportunity to sell its shares in Nvidia is made up of a series of options that will expire early next year. The average exercise price for these options is $230 to $240 per share. And if Nvidia's share price rises, then Softbank may decide not to exercise the option to sell the shares.

At the beginning of 2017, Softbank accumulated a low-profile $3 billion NVIDIA share and became the company's fourth largest shareholder. These shares were subsequently transferred to the Softbank Vision Fund.

By September of this year, the value of these shares held by Softbank reached $7 billion. If Softbank exercises all options at the average exercise price, it will receive nearly $6 billion.

In November, Nvidia reported a weaker-than-expected fourth-quarter results outlook due to weak gaming performance and a sharp drop in mining demand due to a sharp drop in cryptocurrency prices. This prompted Wall Street investment banks to cut the company's target price, such as Goldman Sachs said that the previous bullish view was "obviously wrong."