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Report: SoftBank Was the Big Buyer Behind Recent Tech Rally

By Eric Volkman – Updated Sep 10, 2020 at 9:34AM

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This would help explain the stellar recent performance of stocks such as Tesla, Amazon, and Netflix.

The strong and sustained rally in tech stocks, which appears to have finally come to an end, was due in no small part to a single investor. According to the Financial Times, citing "people familiar with the matter," Japanese tech conglomerate SoftBank (SFTB.Y 0.64%) was the responsible party.

The article's sources say that SoftBank has taken up huge positions in share options in top tech stocks over the past month, to the point where some contracts for individual titles set new records. In recent weeks this activity has also dramatically pushed up volume for single-company calls (i.e., the right to buy a stock at a certain price).

A stock market trading graph.

Image source: Getty Images.

Higher demand for options usually drives the share prices of the underlying stocks higher, and this has been the case for some of the more famous companies in the sector. Tesla (TSLA) has been a particularly strong performer, with the stock up more than 4X so far this year. Other tech stars have also risen steeply: Amazon (AMZN -1.08%) is up by 84%, for example, while Netflix (AMZN -1.08%) advanced 78%.

Although the article's sources did not identify the particular stocks for which SoftBank was/is buying calls, these well-capitalized companies were likely targets. The company revealed in an Aug. 17 regulatory filing that it has bought common stock generously in all three recently.

Despite the recent sharp pullback in these shares, the article's sources say that SoftBank plans to continue buying derivatives contracts in them. If this is the case, it seems likely another rally is in store for the tech sector. 

Perhaps that has already begun for some of the affected companies. In late-afternoon trading on Friday, Tesla was up by 3.6%, although Amazon and Netflix were both down by around 2%.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Netflix, and Tesla and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
$22.10 (0.64%) $0.14
Netflix Stock Quote
$316.95 (3.74%) $11.42 Stock Quote
$95.50 (-1.08%) $-1.04
Tesla Stock Quote
$194.70 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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