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Saudi investors uneasy with how Son is running his $100B Vision Fund

The Japanese conglomerate has transferred, or plans to transfer $26.3B in stakes to the Vision Fund, for which it originally paid $24.9 billion
February 19, 2019 03:00PM

Mohammed bin Salman and Softbank CEO Masayoshi Son (Credit: Getty Images)

SoftBank Group is again receiving pushback from major investors disgruntled with its brash investment decisions in tech firms that have been led by an increasingly powerful Masayoshi Son.

The sovereign wealth funds of Saudi Arabia and Abu Dhabi, the main investors in the firm’s $100 billion Vision Fund, have complained about SoftBank Group’s practice of buying stakes in companies and then passing them onto the Vision Fund at a premium, according to the Wall Street Journal.

SoftBank has poured billions into the hottest American startups of the past few years, including Uber and Compass. But the company has reportedly transferred, or plans to transfer $26.3 billion in stakes to the Vision Fund, for which it originally paid $24.9 billion — a $1.4 billion markup.

More than the markup, though, investors are concerned that Son is buying shares of companies at valuations that are at market-peak pricing, the Journal reported.

Its investments at sky-high company valuations, including the $47 billion allocated to The We Company following its most recent $2 billion investment, have wrangled investors, who see these investments as being made when the market is high, and then passing on to the Vision Fund before the market declines, according to sources cited by the outlet.

Son, SoftBank’s chief executive, said a at a conference earlier this month in Tokyo that, “The Saudis have been wonderful investors who have given us warm support and entrusted their money.”

The tensions between SoftBank and the sovereign wealth funds were first reported in December, after the national funds balked at the prospect of a $16 billion investment in The We Company. Since then, Son’s power in the firm has been displayed after he overruled some investors who opposed a $1.5 billion stake in Chehaoduo Group, a Chinese online car-trading platform, which was accused of fraud this month by a competitor, according to the Journal.

SoftBank has endured a tumultuous few months. In December the firm’s mobile-telcom arm launched an IPO in Japan that would have been the world’s second-largest initial offering, but fell well below expectations.

But this month SoftBank reported a 17.7 percent jump in its shares, bringing its total valuation to just over $100 billion[WSJ] David Jeans