SoftBank will unwind the 'Nasdaq whale' options trades that cost the firm nearly $3 billion, report says
- SoftBank's trading arm SB Northstar will relinquish its risky options positions after backlash from investors and employees, the Financial Times reported Wednesday.
- The tech-stock derivatives trades have already fueled $2.7 billion in losses. SB Northstar will allow its remaining contracts to expire, according to the report.
- The trading arm was revealed in September to be the "Nasdaq whale" making multibillion-dollar bets on tech stocks through the summer.
- Employees, investors, and activist hedge fund Elliott Management have all balked at the high-risk strategy employed by SB Northstar. SoftBank workers "should not be day traders," one employee told the FT.
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SoftBank's tech-focused trading arm will let go of its risky options bets after widespread backlash and losses totaling $2.7 billion, the Financial Times reported on Wednesday.
SB Northstar, the unit led by SoftBank CEO Masayoshi Son that bet on tech stocks' daily moves, will let its options contracts expire, sources told the FT. SoftBank will continue to invest in tech mega-caps, but through long-term equity stakes over highly volatile derivatives trades.
The reversal comes just months after SB Northstar was first revealed by the FT to be the "Nasdaq whale" trading billions of dollars' worth of tech options. The trading arm posted $3.7 billion in losses in mid-November, with the bulk of the shortfall linked to options positions.
SoftBank faced pressure from several parties to abandon the derivatives stakes. Activist hedge fund Elliott Management, which is likely the second-largest owner of SoftBank shares, expressed concern around SB Northstar's trades, The Wall Street Journal reported in November. Some Elliott executives even hedged against SoftBank's bullish positions with their own put options on tech stocks.
In recent calls with SoftBank, Elliott reportedly cautioned SoftBank against making another risky tech-stock bet, and instead urged the firm to stay disciplined in its investing. The hedge fund helped SoftBank recover from a spring plunge by advising the firm to buy back shares and improve governance, according to The Journal.
Investors reportedly questioned why SoftBank was dabbling in day trading, as Son has repeatedly emphasized the firm's focus on long-term tech investments.
Those inside SoftBank have also expressed doubts that the strategy should continue. One told the FT that the firm's workers "should not be day traders," and others pondered whether SB Northstar should be borrowing cash from SoftBank's coffers for some of its trades.
SoftBank told the FT that Son will guarantee any remaining debts linked to his 33% ownership of SB Northstar by the time the arm closes in 2034.
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