Masayoshi Son owes SoftBank $4.7 billion after technical defeat

Masayoshi Son personally owes SoftBank nearly $5 billion over mounting losses on the Japanese conglomerate’s technology bets, which have also wiped out the value of his stake in the group’s second Vision Fund.

The billionaire’s skyrocketing personal liabilities, uncovered by a Financial Times analysis of SoftBank’s recent filings, come as the world’s largest tech investor has been hit by falling tech stocks and private company valuations over the past year.

The 65-year-old CEO and founder of SoftBank said last week he would be stepping down from day-to-day operations at SoftBank. His main focus, he said, will be on the company’s UK chip subsidiary Arm after the tech giant posted quarterly investment losses of $10 billion.

The mounting losses in SoftBank’s various investment vehicles have also added billions of dollars to the bill SoftBank’s founder owes the group in relation to its technology bets. That’s because SoftBank provided Son with the money to invest in its tech-related funds, which it hasn’t had to pay back for many years.

The value of Son’s 17.25% stake in SoftBank’s second Vision Fund is $56 billion. Son’s stake in the investment vehicle rose to as much as $2.8 billion in late 2021, as SoftBank announced high valuations for Start-ups have been able to sell shares in public listings of portfolio companies such as WeWork and AutoStore.

SoftBank has yet to collect $2.8 billion that Son owes in connection with its stake in the fund. Previously, SoftBank offset the value of its equity against the amount it owed the group, meaning it was down to just $4 million at the end of 2021.

Son also owes SoftBank $669 million under a similar arrangement for its Latin America fund, which has backed startups across the continent, although that amount reduces to $252 million when his equity value in the fund is included.

The total amount the Japanese manager owes his company now stands at $4.7 billion, including losses from short-lived in-house hedge fund SB Northstar, SoftBank confirmed to the FT.

Son’s growing liabilities to his own company have arisen as SoftBank shareholders questioned their decision to sharply accelerate the pace of share buybacks in recent weeks, which propelled the share price to a 12-month high earlier this month and the stock rose despite the gravity Losses at his Vision Funds.

Son is personally paying for a third of the losses at Northstar, known for conducting the 2020 “Nasdaq Whale” trade in U.S. tech stocks. The equity trading unit’s total investment losses rose to nearly $6 billion at the end of September as the group continued to liquidate its investments.

Had the internal hedge fund’s outsized derivatives bets paid off, Son could have pocketed a third of the gains.

Similarly, if Vision Fund 2’s investments in private technology companies had been profitable, the SoftBank founder could have turned a handsome profit without raising upfront capital. Instead, the deal has wiped billions of dollars from the net worth of one of Japan’s richest men.

Unlike SoftBank’s first $100 billion vision fund, which secured tens of billions of dollars from Middle Eastern sovereign wealth funds, its second major tech investment vehicle has no outside financiers. The only investors are SoftBank and Son, with part of the company’s stake held as preferred stock that precedes its founder.

The second Vision Fund was one of several blue-chip investors who wrote off their stake in collapsed cryptocurrency exchange FTX last week, with SoftBank’s total losses hovering around $100 million.

With both the Vision Fund 2 and the Latin America Fund, Son has pledged both his interest in the funds and a portion of his SoftBank stake as collateral for the amount he owes the company. In addition, the billionaire founder has also provided a personal guarantee in relation to the unpaid bill.

https://www.ft.com/content/4e709f78-48fc-4713-8904-cf1d8588116c Masayoshi Son owes SoftBank $4.7 billion after technical defeat

Adam Bradshaw

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