Abu Dhabi, UAETuesday 12 November 2019

SoftBank eyes another 100 companies in second Vision Fund

Number is an increase on the 86 companies targeted for the first fund

Japan’s SoftBank is looking at increasing the number of companies it will invest in once as it looks to roll out a second fund. Reuters
Japan’s SoftBank is looking at increasing the number of companies it will invest in once as it looks to roll out a second fund. Reuters

Amid a $9.5 billion (Dh34.9bn) bailout of portfolio company WeWork, Japan's SoftBank plans to invest in 100 companies through its second Vision Fund, up from the 86 in its first round, a senior executive said.

"We have 86 companies in our portfolio in fund one, with another 100 in fund two," Rajeev Misra, chief executive of SoftBank Investment Advisers said at the Future Investment Initiative in Riyadh on Wednesday. "So those 186 companies interacting with each other and doing business with each other will be immense."

Mr Misra's comments come less than a week after the Wall Street Journal reported SoftBank would “scale back” its investment strategy and focus on corporate governance at its portfolio companies.

SoftBank’s first Vision Fund invested $85bn since 2017, with about $15bn more earmarked for investment. The follow-up Vision Fund 2 announced in July is aiming to raise $108bn. SoftBank said it plans to commit $38bn of its own capital in the new fund. Apple, Goldman Sachs, Microsoft, Foxconn and the sovereign wealth fund of Kazakhstan are expected to invest, and seven Japanese financial institutions have signed preliminary agreements to participate.

Both Abu Dhabi’s strategic investment company Mubadala and Saudi Arabia’s sovereign Public Investment Fund invested in the first Vision Fund.

Last week, WeWork accepted $9.5bn from SoftBank Group, its largest investor, in exchange for 80 per cent stake in the company.

WeWork was valued at $47bn at its peak in January and scrapped a high-profile initial public offering attempt last month. It is now valued at less than $8bn in the bailout.

WeWork founder Adam Neumann will leave the company’s board as part of the package, to be replaced by SoftBank executive and newly-appointed executive chairman Marcelo Claure. Mr Neumann is set to walk away from the deal with as much as $1.2bn in WeWork stock, a $500 million credit line from SoftBank and a consulting fee of about $185m, Bloomberg reported.

The bailout grants WeWork's parent We Company a bit more runway as it faced running out of money as early as next month, according to Bloomberg.

WeWork “has a pretty high probability of being a zero for the equity, as well as for the debt,” said billionaire investor Bill Ackman, according to the Financial Times. “As someone who has put good money after bad, I think this looks like putting good money after bad, and SoftBank should have walked away,” the newspaper cited him as saying.

When asked how start-ups balance rapid expansion, and if the culture is for companies to grow too fast, Mr Misra of SoftBank said: “At the end of the day, the business has to make sense, unit economics have to make sense."

He added, "The business has to make sense in a certain town, in a certain country” and the technology and business model have to be extensively tested before a company expands geographically. The tech sector too often spread across geographies before things have been tested and been proven to work.

His comments are in stark contrast to the Vision Fund’s previous mandate that prioritised large investments to achieve rapid geographic growth over generating a profit in the short-term.

Updated: October 31, 2019 01:29 PM

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