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Saturday, November 28, 2020

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  • The Financial Times unmasked the Japanese giant as the “Nasdaq whale” who placed billions in tech stock option
  • Softbank bought around $50 billion worth of stock options recently
  • Softbank stock price fell 3% to extended its correction from the record highs above set in August

Shares of Softbank Group (T: 9984) fell more than 3% on Friday after the Financial Times unmasked the Japanese giant as the “Nasdaq whale” who placed billions in tech stock options. 

Fundamental analysis: Softbank’s bet on tech giants

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Softbank Group bought billions and billions worth of stock options in the past few months as the Japanese behemoth invested aggressively on fast-rising tech stocks. The Street was speculating for weeks that certain hedge funds are aggressively buying tech stocks following the fastest stock market selloff in history that occurred in March and April. 

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A report from the Financial Times, released on Friday early morning European time, noted that the so-called “Nasdaq whale” is Softbank, a Japan-based multinational conglomerate holding company. Softbank is believed to be running, the world’s largest technology-focused venture capital fund, with over $100 billion in capital.

“It’s exacerbating moves. That’s why these moves are getting very stretched both ways,” said Danny Kirsch, head of options at brokerage Cornerstone Macro, of the surge in tech options activity. 

According to reports, Softbank bought around $50 billion worth of stock options. During the most recent stock market rally, Apple’s market cap increased by almost $700 billion. Softbank is known as an aggressive player in the tech startup business, but not so known for investing large amounts of funds in the biggest tech stocks in the world, such as Apple, Alphabet, Microsoft, etc. 

The FT notes that Softbank invested around $4 billion in shares of Amazon, Microsoft, and Netflix, among others. Additionally, the Japanese giant also acquired a stake in Tesla.

“It’s just a trip to the casino. If they’re supposed to be an investment company taking a long-term horizon, then trying to juice your short-term return through options, you’ve turned into a hedge fund,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. 

“We’ll see if they’re reversing it. A lot of the call buying was an upward lift to the market. The sellers of those calls, then had to buy stocks and hedge and it becomes a self-fulfilling prophecy on the upside”.

Last month, Invezz reported that SoftBank reported a net profit of £9.00 billion for the quarter ending June 30.

Technical analysis: Shares slid

Softbank stock price fell over 3% to close at 6334 on Friday on the FT report. This way, the stock price has extended its correction from the record highs above 7000, registered in the first week of August. 


screen shot 2020 09 05 at 4 00 20 pm
Softbank stock daily chart (TradingView)

Shares of Softbank are now down 4% in September. More importantly, Softbank share price is now trading below the 3-month ascending trend line that has supported the stock price. This technical indicator is now expected to provide resistance for the price near 6500. 

Summary

Shares of Softbank fell more than 3% on Friday following a report in the Financial Times that  the Japanese giant is the “Nasdaq whale” who placed billions in tech stock options in recent weeks and months.

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