[ad_1]
TOKYO – Masayoshi Son has always liked to think that he can “feel” when he talks to a promising entrepreneur. For the Japanese tech investor, even a brief face-to-face meeting may be enough to convince him to invest billions in a startup.
Capturing that same magic on a video conference call isn’t that easy. But that’s what Son is under pressure to do now that a series of asset sales has left SoftBank Group with a single dominant asset: Alibaba.
Known for his instinctive and risky investment style, Son has focused on defense this year after the pandemic threw uncertainty about SoftBank’s financial stability. He’s still meeting with founders of new investment candidates, mostly via video conferencing, people with knowledge of the matter say.
SoftBank has raised about $ 50 billion in cash since April, surpassing its goal of $ 41 billion. In addition, it also plans to sell the British chip designer Arm. If the deal wins regulatory approval, SoftBank will win a 25% stake in Alibaba, a 40% stake in its Japanese mobile subsidiary, an 8.6% stake in the US telecommunications company T-Mobile and the Vision Fund. , plus a smaller stake. holdings such as US office space provider WeWork.
Alibaba’s stake, valued at about $ 190 billion based on Friday’s share price, dwarfs all of its other large investments combined. In fact, it is larger than SoftBank’s total market capitalization of 14 trillion yen ($ 135 billion).
Son said his $ 20 million bet on Jack Ma’s Chinese e-commerce startup in 2000 was fueled by instinct. During a trip to China, he met about 20 startup founders, and one of them was Ma. “I could smell it. We are the same animal,” Son said during a public chat with Ma last year.
Since then, Alibaba has been a major factor in SoftBank’s share price and Son’s reputation as an investor. But the risk of its large exposure to the Chinese company was highlighted last week, when Alibaba shares fell after the IPO of its fintech subsidiary Ant Group was drastically suspended at the last minute. SoftBank shares fell 1% last week, while US tech stocks rose and Japan’s Nikkei benchmark reached a 29-year high.
Meanwhile, Son’s other big bets have not been as lucrative. Arm’s $ 40 billion sale, for example, includes a $ 2 billion break-up fee, $ 1.5 billion in stock compensation for Arm employees, and a $ 5 billion payment to SoftBank if Arm meets certain financial goals. If those items are excluded, the price is closer to the $ 31 billion SoftBank paid for Arm in 2016.
The $ 20 billion sale of its shares in T-Mobile, which it obtained through a merger with its US carrier Sprint, came seven years after it bought Sprint for $ 21.6 billion. Among the buyers were SoftBank executives Marcelo Claure, Rajeev Misra and Ronald Fisher, who financed their purchases with a loan from SoftBank, according to documents filed by SoftBank and T-Mobile. SoftBank’s remaining ownership of T-Mobile stock is worth $ 12.5 billion; As part of the sale, SoftBank gave Deutsche Telekom options to buy the majority of these shares.
The nearly $ 100 billion Vision Fund has yet to deliver the returns Son expected when it began investing in 2017. SoftBank committed $ 33 billion to the fund, which was also backed by Saudi Arabia and Abu Dhabi. Most of the money has been spent. As of June, the fund had sold some of its holdings and distributed $ 1.6 billion back to SoftBank. As a rally in tech stocks raised valuations for mature private tech companies that were the original target of the Vision Fund, it is now making smaller investments in early-stage startups.
Without a clear replacement, SoftBank has been careful to ditch its stake in Alibaba. As part of its recent cash-raising activity, it raised $ 14.7 billion through “prepaid forward contracts” using Alibaba shares. But SoftBank won’t start delivering the shares until January 2022 and says it can ultimately choose to repay investors with cash.
The company has begun investing some of its excess cash in U.S. publicly traded tech stocks, a move designed in part to reduce its exposure to Alibaba, according to people familiar with the strategy. But it has received criticism from some analysts for its lack of transparency, especially after reports emerged that it was buying billions of dollars in options.
On the other hand, investors have applauded his commitment to buy back 2 trillion yen worth of shares and reduce debt. Once that’s done, investors will need another reason to buy SoftBank stock instead of Alibaba.
[ad_2]
