SoftBank's Son declares second $100bn tech fund will launch soon

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SoftBank's Son declares second $100bn tech fund will launch soon

TOKYO -- SoftBank Group CEO Masayoshi Son on Thursday unveiled plans to establish a second $100 billion investment fund "in the near future," confirming his determination to double down on his international spending spree.

"I want to officially announce the preparation of fund two," Son declared during an earnings conference in Tokyo. Although details are yet to be worked out, he said the new fund "will be around the same size as fund one."

The first, the nearly $100 billion SoftBank Vision Fund, has transformed tech investing over the past two years, with huge bets on private companies like Uber Technologies and WeWork. Another fund of the same scale would further cement Son's position as one of the most powerful figures on the global tech scene.

The move follows the stellar performance of the existing Vision Fund. SoftBank said its operating profit for the January-March quarter more than tripled on the year to 494 billion yen ($4.4 billion), thanks to gains in the value of the fund's portfolio companies.

"Most of the existing investors are showing high interest in fund two because fund one is doing well," Son said, after announcing that the Vision Fund had generated an internal rate of return of 29%. "There are also many voices from [new] investors who want to participate."

In a show of confidence, Son announced that SoftBank will effectively double its dividend by splitting its shares in two while paying the same amount for each one.

Yet, some warn that Son's aggressive approach is pushing SoftBank to its financial limits.

The Vision Fund had already poured $60.1 billion into 69 companies as of March, according to SoftBank's financial statement released on Thursday. To keep the money flowing, Son said he is considering an "interim start" for the new fund, "which means SoftBank Group will start with 100%" of the capital before inviting other investors.

The conglomerate is resorting to unconventional means of raising money. On Wednesday, it said it is selling its stake in Yahoo Japan back to Yahoo for 526.5 billion yen, after which Yahoo will sell new shares to SoftBank's mobile unit SoftBank Corp. "Money will move from [SoftBank Corp.] to SoftBank Group via Yahoo," SMBC Nikko Securities analyst Satoru Kikuchi said in a note to clients on Wednesday.

Reports have suggested SoftBank is even considering an initial public offering of the Vision Fund, though Son declined to comment on this.

Son's latest push to splash out more on tech companies also comes amid signs of cooling valuations.

His ability to continue generating high returns is about to be tested, with U.S. ride-hailing pioneer Uber planning to make its stock market debut on Friday. The Vision Fund is the top shareholder in Uber, with a 16% stake.

Uber has set a price range of $44 to $50 per share for its IPO, implying a market capitalization in the $74 billion to $84 billion range. The midpoint would be a slight increase from the company's $76 billion valuation in August but a far cry from the $120 billion rumored late last year.

SoftBank has already reflected a $3.8 billion valuation gain on Uber, which means it is unlikely to book further profits unless the stock rallies after its market debut. SoftBank could take losses if the stock falls.

Meanwhile, uncertainty surrounding the planned merger of SoftBank's U.S. carrier Sprint and its rival T-Mobile is raising concern over the group's financial health. Huge acquisitions in the past, including Sprint and U.K. chip designer Arm, have saddled SoftBank with 15.7 trillion yen in debt.

The two American carriers have pushed back the deadline for regulatory approval by three months to July 29, raising fears that U.S. regulators will reject the deal. On Thursday, Son said he remains hopeful over the merger, saying it can help the U.S. to "strengthen 5G as a national strategy."

Regardless, Son makes no secret of his ambition to direct the future of technology. On Thursday, he reiterated his belief that artificial intelligence will have an exponentially greater impact on traditional industries than the internet revolution. Creating a network of market-leading companies would place him at the forefront of the shift.

"I don't like being No. 2," Son said. "I will not be satisfied unless I am No. 1."

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Publication Date
Thu, 05/09/2019 - 00:00