Words: Tom Ward
It’s been an interesting few months for SoftBank, the Japanese conglomerate that owns stakes in Boston Dynamics and Uber alongside more established entities such as Amazon and Alphabet Inc. It started in September when SoftBank was revealed as the ‘Nasdaq Whale’ after hoovering up billions of dollars worth of big tech stocks – a development which the FT described as an “aggressive move into the options market [that] marks a new chapter for the investment powerhouse”.
Not that SoftBank doesn’t have cash to spare. In 2019, it reported a net income of 1.45 trillion yen – around $13.8 billion – and has total assets worth 31.18 trillion yen – around $296 billion. But not all bets seem to be paying off. The company posted a loss of $1.3 billion in Q2 after losing money on tech stocks, suggesting the ‘new chapter’ for the powerhouse investor wasn’t getting off to quite the start CEO Masayoshi Son had expected.
It’s perhaps this setback that has led to three key figures being cut from their positions this week. Rajeev Misra, head of SoftBank’s $100 billion Vision Fund has gone, as have COO Marcelo Claure, and CSO Katsunori Sago. For his part, Son said the changes were brought about to allow more external directors on the board. However, they are also likely to have come as a surprise to the figures involved; until as recently as this week Misra was said to be searching for a home in Abu Dhabi after SoftBank was reported to be considering a move for its Vision Fund from London to the United Arab Emirates.
According to the FT, the move may be due to SoftBank looking to take advantage of lower taxes in the UAE, as well as placing itself closer to Abu Dhabi’s Mubadala sovereign investment vehicle, which has sunk $15 billion into Vision Fund so far. Are these dynamic changes indicative of trouble at the top, or was clearing house part of Son’s masterplan all along?
Masayoshi Son. Credit: Creative Commons/Nobihaya
Founded in 1981, SoftBank is relatively young in the game. Headquartered in Tokyo, the Japanese holding company is primarily known for its stakes in energy, financial companies and, fittingly given its location, tech firms.
The multinational conglomerate was founded by Masayoshi Son, 63, who also serves as CEO of SoftBank Mobile, and chairman of UK-based Arm Holdings. In 2013 Forbes placed Son 45th on its annual list of the most powerful people in the world and, as of 2018, estimates his net worth at $30 billion, making him the second richest person in Japan. Which isn’t surprising considering he’s been making million-dollar deals since his teens.
After moving to California aged 16, Son studied economics and computer science at Berkeley before developing an electronic translator which he sold for $1.7 million while still a student. He then invested the money in importing video games from Japan, netting a further $1.5 million profit.
Having graduated, Son set himself up as an early investor in internet firms, buying shares in Yahoo! and Alibaba in the mid to late Nineties. As of October 2018, SoftBank still owned 29.5% of Alibaba, a stake worth roughly $108.7 billion, although in June of this year Son stepped down the from the Alibaba board.
Marcelo Claure (left) with Aloke Lohia at the World Economic Forum 2012. Photo by Sikarin Thanachaiary/World Economic Forum
When he isn’t playing golf in his $50 million Tokyo mansion, Son keeps one eye on charitable causes. Following the Fukushima disaster in 2011 he pushed for and invested in the world’s largest ever solar power project. Also in 2011 Son pledged $120 million plus his salary until retirement to support victims of that year’s Tōhoku earthquake and tsunami.
Arguably Son’s most innovative brainchild, however, is Vision Fund – a $100 billion tech-focused venture capital fund and the largest of its kind in the world. To date the fund has been responsible for innovations in fields including artificial intelligence and robotics, with Son reportedly aiming to raise $100 billion for a new fund every few years. As of November 2020, a second Vision Fund is being developed with a target of $108 billion, $38 billion of which will come from SoftBank itself. “The door is always open for a second and third fund, but we’re not very popular,” Son has admitted.
The fund itself has been at the centre of controversy after it was revealed that (as of May 2019), Saudi Arabia’s Public Investment Fund had sunk $45 billion into the first Vision Fund (alongside other investors such as Apple and Qualcomm). Speaking to CNBC in the wake of the murder of Saudi journalist Jamal Khashoggi, SoftBank CEO Masayoshi Son called it a “horrific and deeply regrettable act” but went on to explain obligations made to the Saudi people in light of the PIF’s investment. “At the same time, we have also accepted the responsibility to the people of Saudi Arabia, an obligation we take quite seriously to help them manage their financial resources and diversify their economy,” he said.
Image courtesy of Ted Eytan.
Writing for The Startup, finance journalist Ian Agar criticised Vision Fund for accepting PIF backing after the Saudi government launched its own, abhorrent app, Absher, which allows men to keep track of women’s travel as part of the country’s male guardianship system. The app has been rightly criticised by a plethora human rights activists, organisations and numerous international communities. Interestingly, this week’s round of cuts at Vision Fund saw Yasir al-Rumayyan, the managing director of Saudi Arabia’s sovereign wealth fund, resign from the board as well, leaving just nine board members.
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Son’s plan to increase the influence of external investors on the Vision Fund board may not be such a bad thing. It’s thought the move is largely in response to SoftBank’s multi-billion investment in WeWork earlier this year, an investment Son quickly reassessed as “foolish”.
SoftBank had valued WeWork at $47 billion in January of last year ahead of its IPO. At that time it was thought the co-working company could seek a valuation of $100 billion. However, as analysts poured over the company’s financial records the figure dropped, with SoftBank valuing WeWork at $2.9 billion as of March 2020. SoftBank has reportedly sunk $18.5 billion into the company, hence Son’s about turn.
Giving board members outside of SoftBank greater agency in Vision Fund’s future will likely reign in further excessive speculation on the company’s part. While ups and downs are part of the risk for any company, for now, it seems that rather than an indication of troubled waters, Son’s actions represent a rightening of the ship.
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