A multi-billion dollar investment by Japan's SoftBank Group Corp. in stock options tied to individual technology companies helped the sector, and the rest of the market with it, seemingly defy the laws of financial gravity over the summer, The Wall Street Journal reported Friday (Sept. 4).
Those laws seemed this week to be re-asserting themselves.
As of 12:45 p.m. Friday, the Dow Jones Industrial Average was off 1.02 percent for the day and 1.7 percent for the week; the S&P 500 was off 1.3 percent for the day and 2.63 percent for the week; the tech-heavy Nasdaq Composite was off 2.03 percent for the day and 4.25 percent for the week.
Regulatory filings show SoftBank purchased nearly $4 billion in tech shares this spring, the newspaper said, adding that SoftBank declined to comment on the matter. The list of companies whose stock SoftBank purchased in the spring, according to the Journal, included Amazon.com Inc.; Microsoft Corp.; Netflix Inc.; and Tesla.
The purchase of actual stock doesn’t include trades in options, which come in different forms.
Some options give the purchaser the right to buy a stock from a seller if the price hits a certain level. Another form gives the holder the right to compel a counter-party in the option trade to buy the stock if it hits a certain price.
Citing a person familiar with SoftBank’s option purchases, the Journal reported that SoftBank bought and sold a combination of options that gave the conglomerate the capacity to buy shares as their prices rose from low levels and sell them when they reached certain levels.
Even as U.S. tech stocks take a hit, SoftBank is active in other parts of the world. Just this week, the company showed interest in buying ByteDance's TikTok business in India.
In August, SoftBank CEO Masayoshi Son announced the conglomerate had formed a new investment management subsidiary to invest the proceeds of stock sales.