SoftBank's $4 Billion Trading Gains on US Stock-Option Bet: FT

SoftBank shares dropped as much as 8 per cent

SoftBank shares dropped as much as 8 per cent

As the disconnect between the USA stock market and the health of the country's economy continues to widen, shares of SoftBank Group Corp (9984.T) have fallen by 5 per cent in early trading today, after the company made big bets on equity derivatives linked to listed technology companies.

Since April, the share price of SoftBank has fallen by a maximum amount of 5.7 per cent on an intraday basis. Before the Monday fall, the stock had gained 33 per cent since the start of the year.

Sales staff wearing protective masks work at a SoftBank Corp. store in Tokyo.

SoftBank has previously declined to comment on the trades.

Just when investors thought Masayoshi Son was reining in risk at SoftBank Group Corp., the billionaire's foray into highly leveraged derivatives is giving them fresh reason to worry. "The market is falling now and investors have zero visibility, so they are selling Softbank stocks".

The slide in SoftBank shares followed two days of declines on the Nasdaq at the end of last week.

The Financial Times reported on Sunday that the group's trading strategy meant it was now sitting on gains of about $4bn after founder Masayoshi Son drove aggressive bets on equity derivatives.

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SoftBank is now left with large, but as yet unrealized profits, the newspaper reported.

Options of US$4 billion generated an exposure of about US$50 billion, the Wall Street Journal reported.

Son has experimented with dozens of businesses since founding SoftBank in the early 1980s. He began his career in software distribution, trade shows and magazines, before expanding into telecommunications and startups.

In 2013, Son purchased the majority of wireless carrier Sprint in the United States, but failed to turn it around and then sold the business earlier this year. He also acquired chip designer Arm Ltd for $32 billion four years ago in a move that spooked investors.

In another controversial move, he set up the $100-billion Vision Fund to take stakes in scores of tech start-ups.

The market surge this year has helped lift start-up valuations and demand for initial public offerings has soared. Rather than taking that risk, the market makers bought up Apple shares immediately after selling the call options - pushing their price up and in turn making those very same short-term options more valuable.

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