- Daily Zen
SoftBank's stock has dropped almost 40% in the last year.
As the world’s largest tech investor flounders to obtain capital amid a collapse in tech stocks and regulatory crackdown in China, SoftBank founder Masayoshi Son has advised his top executives that they must halt additional tech investments. According to insider sources, the Japanese billionaire made the remarks to his leadership team during a meeting in March, as the group responds to the dramatic drop in the value of its holdings in recent months. The previously undisclosed meetings provide a rare view into SoftBank’s rising tensions, which have wreaked havoc on the tech investment scene since the company launched its first Vision Fund in 2017.
The company’s holdings have been battered by rising interest rates and the war in Ukraine, and the value of its China investments has plummeted, highlighting how Son’s personal fortunes have become interlinked with the company he founded — and its $100 billion fund, which is beholden to the global appetite for tech risk.
According to the sources, the Japanese company’s expected write-down for this quarter was $30 billion, albeit a recent increase in some shares reduced it to roughly $20 billion.
One source close to SoftBank’s China team stated, “Valuations for Chinese firms listed outside have fallen.” “We don’t see a turnaround happening anytime soon.”
SoftBank is attempting to raise funds and is reviewing assets that may be sold, according to a source familiar with the company’s intentions.
Son became concerned about his personal borrowings against SoftBank shares during the sell-off, according to sources close to him.
Some experts believe SoftBank will be able to weather the storm, citing the company’s projected $23 billion in cash on hand. According to New Street Research, this amount is sufficient to “pay interest, bond redemptions, and a potential $6 billion Alibaba margin call,” as well as continue the share buyback program and new investments, albeit at a reduced pace. SoftBank’s finance policy also stipulates that it maintains a cash position sufficient to pay bond redemptions for the following two years.
The Vision Fund, which is sponsored by Saudi Arabia and Abu Dhabi, was supposed to be the first in a series of funds managed by SoftBank’s investment arm. Its reputation was tarnished by its loose attitude and the failure of some of its high-profile investments, including one on the office-sharing company WeWork. SoftBank was unable to obtain outside capital for its second Vision Fund.
SoftBank’s stock has dropped almost 40% in the last year. A statistic comparing the company’s net debt to the value of its holdings — assiduously watched by Son as a barometer of the company’s financial health — has risen from under 10% in mid-2020 to 22%, approaching the 25% threshold Son has sworn not to exceed in “normal times.”