(Bloomberg) — SoftBank Group Corp.’s flagship Vision Fund has quietly sold or written down billions of dollars of its publicly traded holdings in recent years, a sign of founder Masayoshi Son’s shift away from capital operations. risk that were once an obsession and aimed at strategic investments in semiconductors and artificial intelligence.
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Since the end of 2021, the world’s largest startup fund has seen its U.S.-listed portfolio shrink by nearly $29 billion, selling its stakes in companies including Coupang Inc., DoorDash Inc. and Grab Holdings Ltd. . show regulatory filings. That figure does not include the sale of Vision Fund’s stake in chip designer Arm Holdings Plc to SoftBank last year. The former tech kingmaker is a shadow of its former self, having laid off more than a hundred employees and slowed new investments to a fraction of its former pace.
Son is selling assets from the fund’s portfolio as it prepares for possible forays into AI and related hardware, people familiar with the billionaire’s thinking said. SoftBank’s equity capital markets team – a group of traders like Goldman Sachs – played a central role in monetizing the Vision Fund’s significant stakes with minimal market disruption, said the sources, who asked not to not be identified when discussing private matters.
Many investments led by the president of SoftBank now bypass the Vision Fund and are orchestrated by the holding company. While Son has long floated the possibility of a series of Vision Funds launching every two or three years, the prospect of a third Vision Fund — let alone a fourth — no longer presents itself, the people said.
Instead, the fund’s skeleton staff consists mainly of caretakers. The equity capital markets team is instrumental in spotting the most opportune times for asset sales, sometimes through block trades in secondary markets, the sources said. They focus on consolidating investment gains and reversing any losses.
Son moved on to new obsessions, inspired in part by Arm’s success. The chip designer’s market value has soared to about $106 billion since its market debut last year, making SoftBank’s 90% stake worth more than all of SoftBank.
One possible project on the horizon: Funding a $100 billion chip company to compete with Nvidia Corp. and supply semiconductors to power the development of AI services. The 66-year-old’s plans remain in flux, the sources said.
SoftBank’s asset sale information comes from 13F filings with the U.S. Securities and Exchange Commission and represents only the fund’s U.S.-listed companies. This represents about half of its publicly traded portfolio companies in terms of fair value. The Vision Fund has also gradually sold its stakes in Indian startup Paytm and China’s SenseTime Group Inc., with SoftBank now owning less than 5% of either company.
In terms of SoftBank’s overall net asset value, which subtracts liabilities, the Vision Fund’s contribution amounted to 7.3 trillion yen ($47 billion) at the end of December, up from around 9.5 trillion yen at the end of 2021. Arm’s contribution by the same measure amounted to ¥. 6.100 billion at the end of December.
A SoftBank representative declined to comment.
Change of strategy
Seven years after the Vision Fund’s launch ceremony in Riyadh, the Tokyo-based investor has little to show for an initiative that funneled billions of dollars from Saudi and Abu Dhabi sovereign wealth funds into young technology companies. The experience helped fuel a global surge in valuations that erupted when Son’s exuberance met reality.
A series of high-profile implosions followed, including those of WeWork Inc., Katerra Inc. and Zume Pizza Inc., damaging Son’s reputation and increasing his personal debts to the company.
SoftBank’s change in strategy also reflects a reset in the broader venture capital market. The two Vision Funds and the Latin America Funds have together managed committed capital of more than $160 billion, by far the largest seed capital ever raised. The staff first set out to find promising companies requiring investments of a minimum of $100 million, more money than many start-ups were willing or able to spend effectively.
“SoftBank has expanded pretty excessively into some early-stage companies where maybe they thought capital might be the real differentiator in the marketplace,” Matt Murphy, partner at Menlo Ventures. “Often it didn’t work well. Sometimes it was.
The startup sector has become more conservative in recent years. Venture capitalists and corporations have recognized the dangers of too much money.
“I don’t think there’s that much demand for that amount of capital in the market right now,” he said.
Accelerate sales
Asset sales by Vision Fund have accelerated, according to SEC filings. Since late 2021, SoftBank has sold significant stakes in Coupang, but more than a quarter of the trading volume has occurred this year. It also continued to sell its stakes in Grab and DoorDash and divested entirely from Uber Technologies Inc. and India’s Zomato Ltd.
At the same time, the Vision Fund sold back to SoftBank the 25% stake in Arm that it had obtained in lieu of SoftBank’s $8.2 billion capital commitment. Cambridge, UK-based Arm, whose power-saving chips are used in virtually every mobile device in the world, went public in September.
In recent months, SoftBank has invested directly in companies it considers strategically important, in some cases taking majority stakes. The Japanese investment firm is in talks to acquire British semiconductor startup Graphcore Ltd., Bloomberg reported. Earlier this week, SoftBank led a $1.05 billion funding round for British self-driving startup Wayve Technologies Ltd., investing alongside Nvidia and existing backer Microsoft Corp. In 2022, blank check company SoftBank merged with robotic warehouse automation company Symbotic Inc., and the two companies have since partnered on projects.
Past deals included the acquisition of U.S. carrier Sprint, as well as Vodafone Group Plc’s Japanese operations and Yahoo Inc.’s stake in Yahoo Japan. The Sprint acquisition led to an increase in SoftBank’s stake in T-Mobile last year, the result of a deal struck when T-Mobile purchased Sprint in 2020.
“The Vision Fund has been a prolific seller”
For all but one of the last seven quarters, the total value of Vision Fund disposals has exceeded that of investments, the company’s earnings reports show. During the December quarter, the Vision Fund divested $2.2 billion of its assets while spending $90 million on investments.
This helped bring SoftBank’s cash position to 6.2 trillion yen, up from 4.6 trillion yen at the end of 2021. The second Vision Fund still has about $6 billion to spend, but in practice it’s up to Its to direct the money as it wishes, since the Second Vision Fund does not have external partners, said sources close to the management of the fund.
Kirk Boodry, an analyst at Astris Advisory, estimates that the two Vision Funds sold at least $6 billion of their holdings in the fiscal year ending in March. The first Vision Fund has sold at least $5 billion since Sept. 24, he said.
“The Vision Fund has been a prolific seller since September,” he said. “A growing cash pile could indicate a deeper pivot toward generative AI. »
SEC filings also do not reflect sales or bankruptcies of unlisted companies in which SoftBank has invested. The Vision Funds have together invested in hundreds of startups, the majority of which remain private. The fund’s withdrawal of large new investments in startups and generous follow-on investments is contributing to a global venture capital drought.
Some of the Vision Fund portfolio companies that have gone bankrupt this year include window maker View Inc. and genetic testing company Invitae Corp.
“There is no doubt that Vision Fund has had an impact on startup valuations in 2020-2021,” Boodry said. “Those days won’t come back.”
–With help from Jane Pong.
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