Masayoshi Son personally owes SoftBank close to $5bn because of growing losses on the Japanese conglomerate’s technology bets, which have also rendered the value of his stake in the group’s second Vision Fund worthless.
The billionaire’s ballooning personal liabilities, discovered through a Financial Times analysis of SoftBank’s recent filings, comes as the world’s biggest tech investor was hammered by plunging tech stocks and valuations in private companies over the past year.
The 65-year-old chief executive and founder of SoftBank last week said he would step back from running day-to-day operations at the group. His main focus, he said, would be on the company’s British chip subsidiary Arm, after the technology conglomerate posted quarterly investment losses of $10bn.
The widening losses in SoftBank’s various investment vehicles have also added billions of dollars to the tab that Son owes the group in relation to its technology bets. This is because SoftBank fronted him the money to invest in its technology-related funds, which he is under no obligation to repay for many years.
The value of Son’s 17.25% stake in SoftBank’s $56bn second Vision Fund was also wiped out entirely by the end of September, having been valued at $682mn during the previous quarter. His stake in the investment vehicle climbed as high as $2.8bn at the end of 2021, when heady valuations for start-ups enabled SoftBank to sell shares in public listings of portfolio companies such as WeWork and AutoStore.
SoftBank has not yet collected $2.8bn that Son owes in relation to his stake in the fund. Previously, SoftBank netted off the value of his equity from the amount he owed the group, meaning at the end of 2021 this stood at just $4mn.
Son also owes SoftBank $669mn under a similar arrangement on its Latin American fund, which has backed start-ups across the continent, although this is reduced to $252mn when his equity value in the fund is taken into account.
The total amount the Japanese executive owes his company is now at $4.7bn, when losses in the group’s shortlived internal hedge fund SB Northstar are also taken into account, SoftBank confirmed to the FT.
Son’s growing liabilities to his own company have emerged as SoftBank shareholders have questioned its decision to sharply accelerate the pace of share buybacks in recent weeks, which pushed its share price to a 12-month high earlier this month and left its stock buoyant despite the heavy losses at its Vision Funds.
Son has to personally cover a third of the losses in Northstar, which earned notoriety for carrying out the “Nasdaq whale” trades in US technology stocks in 2020. The stock-trading unit’s total investment losses grew to nearly $6bn at the end of September as the group continued to liquidate its investments.
If the internal hedge fund’s outsized derivative bets had paid off, Son would have reaped a third of the gains.
Similarly, if Vision Fund 2’s investments in private technology companies had been profitable, the SoftBank founder stood to gain handsomely without putting up any upfront capital. Instead the arrangement has wiped billions of dollars off the net worth of one of Japan’s richest men.
In contrast to SoftBank’s first $100bn Vision Fund, which secured tens of billions of dollars from Middle Eastern sovereign wealth funds, its second major technology investment vehicle has no outside backers. The only investors are SoftBank and Son, with a slug of the company’s stake held as preference shares that rank ahead of its founder.
The second Vision Fund was one of a number of blue-chip investors that wrote off its stake in collapsed cryptocurrency exchange FTX last week, with SoftBank’s total losses standing at about $100mn.
In both Vision Fund 2 and the Latin America Fund, Son has pledged both his stake in the funds and a portion of his SoftBank stake as collateral for the amount he owes the company. On top of this, the billionaire founder has also provided a personal guarantee in relation to the unpaid bill.
This story was first published in Nikkei Asia