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Masayoshi Son rises again as SoftBank vision delivers winning streak

Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp -  Kiyoshi Ota/Bloomberg
Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp - Kiyoshi Ota/Bloomberg

Masayoshi Son had been here before. As the early months of the coronavirus pandemic pummelled global stock markets, the multibillion-dollar bets that SoftBank had placed had gone south.

The numbers were staggering. In May, the Japanese conglomerate, the world’s biggest tech investor, posted its deepest ever loss, the first time it had failed to make an annual profit in 15 years. The Vision Fund, Son’s $99bn (£72bn) vehicle for much of SoftBank’s riskier ventures, lost $17.7bn alone.

Son called Covid an “unprecedented crisis” as he presented investors with a PowerPoint painting his investments as horses, falling into a treacherous “valley of coronavirus”. Only one sprouted wings, enabling it to fly to safety – and survival.

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SoftBank, which had made a string of high-profile gambles on companies such as Uber, WeWork and hotel chain Oyo, looked exposed to the pandemic. And yet, Son was defiant. “Some of our unicorns will fly,” he insisted.

Son, 63, one of Japan’s wealthiest men who founded SoftBank in 1981, is a notorious optimist, but his confidence during the market panic came from experience.

He had lost almost everything before. After Son briefly eclipsed Bill Gates as the world’s richest man in 2000, SoftBank lost 98pc of its value when the dotcom bubble burst. But in the same year, it made a $20m investment in a little-known Chinese start-up called Alibaba that over time would become worth more than $100bn. Coronavirus was not Son’s first crisis, and he could be forgiven for seeing opportunity in it.

‘Some of our unicorns will fly’

Today, almost a year after that low point, SoftBank is on a winning streak – and Son appears to have been vindicated. After an initial crash, tech shares have soared, and the 21 trillion yen (£140bn) firm’s own value has hit an all-time high. In February, it even exorcised the demons of the dotcom era, with its share price overtaking the 2000 peak.

“SoftBank has really turned a corner over the past year,” says Rolf Bulk, an analyst at New Street Research. “A lot of the companies in the Vision Fund such as Uber initially struggled. As we exit the crisis, a lot of these businesses are doing very well, and will probably continue to do very well.”

SoftBank started as a software distributor and was little known outside of Asia a decade ago, but capitalised on its lucrative Alibaba investment and a prescient decision to sell the iPhone through its Japanese telecoms business to become a global player. In 2012, it took a majority stake in the American mobile network Sprint, and in 2016, made an even bolder move with the £24bn takeover of Arm, the FTSE 100 microchip firm.

Robo-warehouse firm AutoStore
Robo-warehouse firm AutoStore

It was soon followed by the Vision Fund, the biggest ever vehicle for technology investment, which raised $99bn from SoftBank and investors including Saudi Arabia and Abu Dhabi. Despite being managed out of London, Son exercised close control of investment decisions; former executives say he often seemed impatient to throw money at entrepreneurs he took a liking to.

Among its wilder bets were the office-sharing start-up WeWork, which would take more than $10bn in SoftBank money but came close to collapse amid a botched US listing, Wag, a dog-walking app that took a $300m Vision Fund investment, and Zume, a pizza making robot. These were a handful of excesses among 150 investments but executives disagreed about multiple others. Son would ultimately make the call, believing any one could be the next Alibaba.

‘The goalposts have moved’

The fund’s impact was big enough to rock the wider venture capital world, forcing other funds to write bigger cheques. “They said we’re just going to be the biggest guy on the block,” says Mark Tluszcz, the chief executive of tech investor Mangrove Capital Partners. “The goalposts have moved.”

The Vision Fund spent liberally, and could afford to. Almost as soon as the first fund closed, Son started work on plans for a similarly-sized “Vision Fund 2”. But confidence had been hit. The second fund would come, but at a fraction of the first one’s size, and with SoftBank as its sole investor.

But as the virus has ripped through the world economy, SoftBank has been on a winning streak. Under pressure from activist investors Elliott Management to return cash, Son has shown he can sell as well as buy, engineering a $40bn sale of Arm to Nvidia and pulling off a $26bn sale of Sprint to US network T-Mobile.

These sales have increased the importance of the Vision Fund, which has benefited from a fervent market for US tech shares, buoyed by a surge in “Spacs”, blank cheque investment vehicles that have been particularly hungry for the type of future-gazing start-ups the fund backed.

Delivery app DoorDash, South Korean ecommerce company Coupang and property website Compass have all enjoyed public offerings. Investments that have raised eyebrows, such as smart window maker View Glass and robotics company Berkshire Grey, have joined the train of companies merging with Spacs. Even WeWork has announced its own merger that values it at $9bn. Singapore taxi app Grab last week disclosed plans for a Spac that will value it at $35bn, 10 times the Vision Fund first invested at.

Investments such as TikTok owner ByteDance and Chinese taxi app Didi are tipped to go public in the next year.

‘Don’t bet against ‘Masa’’

While the turnaround has largely been down to surging investor interest in technology companies, insiders say the Vision Fund has changed too.

After WeWork, the company put in stricter rules about governance and conflicts of interest, and started writing smaller cheques. The last billion-dollar investment was over a year ago.

New Street analyst Bulk says that while the turnaround has largely been down to surging investor interest in technology firms, confidence in SoftBank itself has also improved. He predicts the Vision Fund will report a record profit of over $25bn for the first quarter of the year.

Son, or “Masa”, as he is known to those close to him, could find success encouraging further risky bets. The second Vision Fund is focused on smaller and more stable investments in promising areas such as health and artificial intelligence.

But Son has still shown occasional glimpses of his wild streak. Last autumn SoftBank itself made a string of short-lived but undisclosed bets in publicly-traded tech companies that spooked investors.

Dealmaking has picked up, too. According to figures from PitchBook, the Vision Fund has already completed 17 investments this year, compared with 38 in the whole of last year.

There are still casualties. The Vision Fund was the biggest shareholder in Greensill, the British supply chain financing firm that went into administration last month.

SoftBank remains a bet on Son. “It’s in the DNA of ‘Masa’, and SoftBank, to make bold moves, but don’t bet against ‘Masa’,” a former executive says. “He’s going to make mistakes, but in aggregate, it’s hard to argue with consistent performance.”