After establishing its Vision Fund as the world's preeminent marginal investor in Silicon Valley's most overhyped (and overvalued) startups, SoftBank, its CEO Masayoshi Son and its Middle Eastern backers have settled on a time-tested strategy for locking in profits even if the startups they've backed never realize profits, as some have warned might be the case.
That strategy? Dumping their shares on unsuspecting retail investors.
That's right. According to the Wall Street Journal, in what would be an unprecedented move for a venture fund with an international reach, SoftBank is reportedly considering an IPO for its $100 billion Vision Fund. The Japanese telecoms conglomerate with a massive VC arm is also reportedly in talks with the Sultanate of Oman to secure an additional investment in its existing fund. Masayoshi Son also recently visited China to discuss potential investments in the Vision Fund worth several billion dollars.
And, if the offering goes through, the firm is already drawing up plans to launch a second 'Vision Fund' after the original allocated all of its capital in private investment deals involving Uber, WeWork and others in under two years.
SoftBank is considering audacious fundraising plans, including a public offering of its $100 billion investment fund and the launch of a second fund of at least that size, as it looks to seize on an exploding startup scene, people familiar with the matter said.
More immediately, SoftBank is negotiating with the sultanate of Oman for an investment of several billion dollars in its existing $100 billion Vision Fund, which raised nearly all its cash from Saudi Arabia and Abu Dhabi, the people said.
The fund’s staff is hustling to keep up with the frantic pace of deal making by SoftBank founder and Chief Executive Masayoshi Son, who has invested nearly all the money that the Vision Fund took in just two years ago.
Highlighting the need for new funds: Mr. Son recently returned from China, where he negotiated informal deals worth several billion dollars that the Vision Fund doesn’t yet have, one of the people said.
It's difficult to imagine that the IPO would be anything other than a desperate exit strategy for SoftBank, considering recent reports that the firm's backers in Saudi Arabia and Abu Dhabi have reportedly expressed reservations about Masayoshi Son's investment strategy, complaining that he had made reckless investments at valuations that many felt were too high. And Uber, one of the fund's most visible investments, has already cut its planned valuation at IPO twice.
The news comes just weeks after WSJ reported that Masayoshi Son lost $130 million of his personal fortune after buying into bitcoin at the top of the 2017 bubble, then selling while prices were crashing.
But in a sign that some will interpret a Vision Fund as a sign that the rally is only just getting started, let's look at the recent trend: Tesla shares climbed after the company returned to the market to plug a massive hole in its balance sheet (which will still leave it incapable of investing more in capex), and Beyond Meat, a company with no profits to speak of, soared 150% during its trading debut.
In other words: If SoftBank wins regulatory approval for the deal, retail traders will likely be more than happy to supply an escape hatch.