SoftBank taps Goldman to initiate formal talks with investors for new fund

FILE PHOTO - SoftBank Corp. placard is prepared during a ceremony to mark the company's debut on the Tokyo Stock Exchange in Tokyo, Japan, December 19, 2018. REUTERS/Issei Kato/File Photo

SoftBank Group Corp. is working with Goldman Sachs Group Inc. to raise money for its second $100 billion technology investment fund and will begin formally soliciting investors in July, according to people familiar with the matter.

SoftBank and its bankers, which also include Centricus and Cantor Fitzgerald, have held preliminary talks with sovereign wealth funds from Singapore, Saudi Arabia, Abu Dhabi, Kazakhstan and Oman, said the people, who asked not to be named because the matter is private.

SoftBank may contribute $40 billion to $50 billion, up from $28 billion in the first fund, because of what founder Masayoshi Son sees as potentially lucrative returns, the people said. The goal is to close the fund by March 2020, one person said.

While Son has made no secret of his intention to raise more capital after the first Vision Fund, there has been heated debate over whether he would be able to create another $100 billion behemoth. The initial fund was the largest ever of its kind, fueling concern it would drive up startup valuations and hurt returns. Adding evidence to the argument was the initial public offering flop by Uber Technologies Inc., one of the fund’s highest-profile investments.

Yet SoftBank and its bankers have gained confidence in their effort after they were approached by several sovereign wealth funds and received positive early responses from other investors. The talks are preliminary and the fund may not close as intended next year or may raise less money than anticipated, the people said.

“Because we have made great results and performance in SoftBank Vision Fund I, a majority of investors have shown high interest in Vision Fund II,” Son said last month on a conference call to discuss earnings. “On top of that, many investors around the world showed their interest to be part of Vision Fund II.”

SoftBank’s representatives declined to comment on the details for the second fund.

The first Vision Fund was dominated by Saudi Arabia, which contributed $45 billion of the total. Mohammed bin Salman, the crown prince and chairman of the nation’s sovereign wealth fund, told Bloomberg in October that he would pledge the same amount of money for the next Vision Fund. However, it is unlikely the Public Investment Fund will invest such a large amount the second time around, in part because SoftBank has been keen to broaden its investor base, the people said.

Saudi Arabia and the crown prince faced outrage last year after the murder of government critic Jamal Khashoggi. Analysts such as Sanford C. Bernstein & Co.’s Chris Lane worked through the financial implications if SoftBank were to take little or no money from the Saudis in the future.

PIF declined to comment on its plans for the second Vision Fund.

Singapore’s GIC Pte., Kazakhstan’s sovereign fund and financial firms in Taiwan may each invest $2 billion or more in the new fund, while Oman may put in a smaller amount, one person said. GIC declined to comment, while Kazakhstan and Oman didn’t respond to requests for comment.

London-based Centricus, formed by former Deutsche Bank AG banker Nizar Al Bassam and former Goldman partner Dalinc Ariburnu, helped with fundraising and advised on the first Vision Fund. Rajeev Misra, who oversees the fund, is a former Deutsche Bank executive.

Son disclosed that the first Vision Fund has earned his company 62% returns so far after making 71 investments for a total of $64.2 billion. Those returns have been boosted because part of the capital contributed by other investors is in fixed-return preference shares that are capped at 7%. In a research report, Bernstein’s Lane explained that limited partners made 45% on their common shares and a blended return of 29% including the preference shares.

Son said in an interview with Bloomberg News last year that he would like to raise a new Vision Fund every two or three years because he sees so many opportunities in artificial intelligence and other cutting-edge technologies. He said in May that the second fund would be about the same size as the current Vision Fund.

The first fund has taken stakes in many of the world’s leading technology companies, including Uber and WeWork Cos. Ride-hailing is the single biggest segment, including stakes in China’s Didi Chuxing, India’s Ola and Singapore’s Grab.

”My heart and mind are full of energy for the Vision Fund, taking up 97% of my brain,” Son said in May.

Bloomberg