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Alibaba stumbles after SoftBank sells

Jack Ma, founder and chairman of Alibaba Group
VCG | Getty Images
Jack Ma, founder and chairman of Alibaba Group

Shares of Alibaba fell about 6.5 percent Wednesday after Japan's SoftBank announced it would sell at least $7.9 billion of equity in the company a day earlier.

Softbank, Alibaba's largest shareholder, is paring its stake to roughly 28 percent of the company as it looks to cut down on overall leverage and boost liquidity. The Japanese bank plans to sell $2 billion worth of shares to Alibaba, $400 million to the Alibaba Partnership and $500 million to an unnamed sovereign wealth fund, the company said in a statement.

"As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to reinvest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders," Alibaba Executive Chairman Jack Ma said in a statement.

Yahoo, which owns roughly 15 percent of Alibaba, tried to spin off its stake last year but called off plans in December after the IRS said the divestiture would have been a taxable event. Instead, Yahoo is now planning on selling its core business.

Last week, Alibaba announced U.S. regulators are investigating its accounting practices, sending the shares down more than 7 percent in the wake of the news. The Chinese e-commerce giant said that the Securities and Exchange Commission requested documents and information related to the way it adds earnings and how it reports transactions with other companies.

Alibaba's stock closed at $76.69 Wednesday, down from its 52-week high of $91.60. Shares of the company are down more than 15 percent year over year.