The writing was already on the wall last month when we reported that SoftBank’s attempt to corner a handful of giga-cap tech stocks with call spreads lead to a surprising $3.7 billion loss for the Japanese VC conglomerate’s brand new public trading entity, SB Northstar, better known as the “Nasdaq Whale”, which is one-third owned by Masa Son and headed by former Deutsche Bank prop trader Akshay Naheta out of Abu Dhabi.
As a result of the unexpected loss, which according to Bloomberg led to a “sustained backlash from investors”, SoftBank Group has decided to beach the Nasdaq Whale for good (contrary to prior reports it would no longer dabble in derivatives which proved to be fake news) and is winding down its derivatives strategy (even as it continues investing in large US tech stocks such as Amazon and Facebook, using $80bn in cash raised from its recent asset sales). It will do so by letting its billions in options expire, instead of maintaining its positions, Bloomberg sources said.
As of the end of September, the unit had purchased almost $17 billion of shares in US tech companies and invested another $3.4 billion in equity derivatives. Since most of the derivatives are short-term, about 90% of the contracts – which were used to supercharge returns by squeezing option gamma in an illiquid market – will close out by the end of December, even as SoftBank holds on to its underlying portfolio of big tech stocks listed below.