SoftBank Group says it spent $1.35 billion on buybacks in October

 By Sam Nussey

TOKYO (Reuters) - SoftBank Group Corp <9984.T> said on Monday it spent 139.3 billion yen ($1.35 billion) repurchasing almost 20 million shares in October, part of a record buyback plan that has pushed the group's share price to near two-decade highs.

The repurchases represent a marked escalation from the 40 billion yen spent in September, with the buybacks funded by an asset sale programme that has swelled SoftBank's cash pile.

The Japanese conglomerate reports its quarterly earnings on Monday, with investors awaiting details on SoftBank's plans for the cash as the group regains its confidence following a string of soured investments.

 

Top SoftBank exec ran smear campaigns against Nikesh Arora, Sama: Report

In a bid to emerge as the probable right-hand man of Masayoshi Son — chief of SoftBank — Rajeev Misra, Softbank's Vision Fund chief, ran a smear campaign to oust top executives Nikesh Arora and Alok Sama, The Wall Street Journal reported. Arora was once seen as the successor of Son. However, Misra wanted the position for himself. Misra runs a $100-billion technology fund that has invested in companies like in Uber, WeWork, Paytm, Oyo, etc.

WSJ, in its report, said that Misra planted negative stories against Nikesh Arora to damage his reputation in the company. This also included setting up of a honeytrap for potential sexual blackmail. The report said that Misra paid an Italian businessman $500,000 to carry out the plan while promising more money and a senior position in his office. He also inspired a shareholder smear campaign against Arora and Sama that charged both of them with unethical behaviour.

Misra's spokesperson denied the allegations and said, "These are old allegations which contain a series of falsehoods that have been consistently denied. (Misra) did not orchestrate a campaign against his former colleagues."

Nikesh Arora left Softbank in 2016, while Alok Sama quit in 2019. Currently, Arora is the CEO of Palo Alto Networks, and Sama is a senior advisor at Warburg Pincus. Softbank has come under criticism and is going through a rough patch as several investments made by Vision Fund have not done well. Softbank reported two disappointing quarters due to bad investments.

Firstcry secures around $400 mn from Softbank as part of series-E funding

Baby and mother care products retailer Firstcry has secured around $400 million (Rs 2824.23 crore) from Softbank Vision Fund as part of its series-E funding. While the Japan-based PE fund has infused $296 million (Rs 2,120.5 crore) upfront, it has committed another $100 million (Rs 703.71 crore) in the second tranche.

According to the financial data accessed by business intelligence platform Tofler, FirstCry’s holding entity BrainBees Solutions has allotted 73.1 million series E shares at a price of Rs 386 each to SVF Frog, a Cayman Islands-registered entity of Softbank as part of the deal.

Though, how much stake Softbank will hold after this round of funding has not been clarified by the company. Media reports had earlier suggested that the Softbank was looking at around 40 per cent holding in the company in lieu of $400-million investment.

Founded in 2010 by Supam Maheshwari and Amitava Saha, FirstCry has emerged as the leader in the sunrise baby and mother care sector segment, prompting rising interest of global investors.

Prior to this funding round, the start-up has raised about $125 million from clutch of investors such as IDG Ventures India, SAIF, Valiant Capital, Ratan Tata, Vertex Venture, and NEA.

The funds raised from Softbank are expected to be used by FirstCry to expand both its offline and online presence as well as to strengthen its technology platform. The company posted a revenue of Rs 535 crore in FY19, which it expects to grow to around Rs 2,000 crore in the current financial year. FirstCry had acquired BabyOye’s franchise business from Mahindra for $54 million in 2017.

As part of its diversification drive, the company acquired Oi Playschool in November last year. The company now eyes to expand its playschool portfolio to more than 1,000 centres across the country in the next five years.

SoftBank set for sharp quarterly profit drop amid pressure from Elliott

Japan's SoftBank Group is expected to post a slide in profits for the past quarter, deepening concern about its ability to secure funding for a second Vision Fund and giving activist fund Elliott Management more fodder for a shake-up.

Elliott, the New York-based fund founded by billionaire Paul Singer, has amassed a stake of almost $3 billion in SoftBank and is pushing for changes including $20 billion in stock buybacks, sources said last week.

The emergence of Elliott, one of the world's most powerful activist investors, as a prominent SoftBank shareholder is likely to highlight the Japanese conglomerate's difficulties following its soured bet on office-sharing startup WeWork.

SoftBank, which reported its first quarterly loss in 14 years in July-September, has come under increasing pressure for its lack of transparency, especially around its $100 billion Vision Fund of largely unlisted start-ups.

"I'm not sure investors will have confidence in the private valuations that drive the reported performance of the Vision Fund, particularly after the performance of WeWork and others," said Morningstar analyst Dan Baker.

The tech conglomerate, which reports on Wednesday, is expected to post a 20% fall in operating profit to 345 billion yen ($3.1 billion) in the October-December quarter, according to the average forecast of three analyst estimates compiled by Refinitiv.

That would follow a quarterly operating loss of 704 billion yen when the firm was whiplashed by an $8.9 billion hit at the Vision Fund as the value of WeWork and other bets like Uber plunged. The loss prompted founder Masayoshi Son to acknowledge his "investment judgement was poor in many ways".

A second quarter of dismal results would only reinforce doubts about the viability of a second, massive fund, given that it would be reliant on profits from the current Vision Fund for some of its funding.

TOUGH CALL

Analysts have long highlighted the challenge of forecasting SoftBank's earnings, given the limited visibility on Vision Fund valuations. In the six months to September, the fund said it had gains on 25 companies and losses on another 25, but identified only a handful of names.

What is clear, though, is that since the WeWork bailout, a slew of portfolio companies - from hotel-booking platform Oyo to cloud robotics firm CloudMinds - have cut jobs and come under pressure to show their business models are viable.

That's a marked shift from Son's previous strategy of prioritising growth over profitability.

SoftBank Corp, the telecommunications firm that is two-thirds owned by SoftBank Group, and one of the parent's biggest listed assets, on Friday reported a 15% rise in quarterly profit.

The Vision Fund has stakes in nearly 90 start-ups. Only five were listed prior to the October-December quarter. During that period, three of those fell although ZhongAn Online P&C Insurance Co Ltd rose almost 60%.

Chip designer Arm, which will also provide an update on Wednesday, has turned money losing.

SoftBank's shares, which have been propped by positive sentiment towards China's Alibaba, have been boosted by the news of Elliott's stake and are up around 8% year to date.

WeWork appoints US real estate industry veteran Sandeep Mathrani as CEO

Softbank-backed office sharing firm WeWork named real estate industry veteran Sandeep Mathrani as its new chief executive on Saturday.

Mathrani will join the company as the CEO from February 18, 2020 and will report to Marcelo Claure, who will remain as executive chairman, the company said in a statement. Mathrani succeeds co-CEOs Sebastian Gunningham and Artie Minson, WeWork said.

Both Gunningham and Minson will remain with the company at least through a transition period to ensure a smooth onboarding process, the company said.

The CEO search was handled by the WeWork board without an external executive search firm, the sources said, adding that a couple of search firms were initially considered. WeWork did not immediately respond to requests for comment.

Mathrani will bring much-needed real estate experience to WeWork. He is the former chief executive of Brookfield Properties' retail group, and prior to that he was an executive at real estate firms including Vornado Realty Trust.

Brookfield declined to comment. The company announced in early December that Mathrani would depart Brookfield and that his last day of work would be January 31.

WeWork began its search for a new CEO in November following the departure of co-founder Adam Neumann, who drew criticism for his erratic management style.

WeWork's IPO was shelved last year and the company recorded a steep plunge in valuation, to less than $8 billion from $47 billion.

The news about Mathrani was reported earlier on Saturday by The Wall Street Journal.

SoftBank in talks to sell stake in India's renewable energy venture: Report

SoftBank Group Corp is in talks to sell a majority stake in its renewable energy joint venture in India as it looks to raise cash after facing setbacks to its global investments, India's Economic Times daily reported on Thursday.

As part of the move, the Japanese technology and investment giant has been in talks with sovereign wealth and pension funds from the Far East and Gulf regions, as well as some Silicon Valley technology giants, the report said, citing people in the know of the matter.

A SoftBank representative in India did not immediately respond to an email request from Reuters for comment.

The group is looking at a partner that can provide equity commitments of $1.5 billion to $2 billion to execute and complete a pipeline of 7 gigawatts of renewable projects around the world, the report said.

SoftBank is facing renewed investor scrutiny after it was forced to bail out one of its best known portfolio companies, the cash-burning, office-sharing firm WeWork, for about $10 billion last year.

This has put a spotlight on founder Masayoshi Son's strategy of pouring billions of dollars into unproven, money-losing startups at a time when it is getting squeezed by a sell-off in many of its listed bets.

Its bailout effort for WeWork appeared to have complicated after talks to secure $3 billion from Japan's three biggest banks stalled, Reuters reported last month.

For its India renewable energy venture, SoftBank is considering options including a sale of its entire 70 per cent stake or a majority stake, the ET reported. The unit is a joint venture with Bharti Enterprises and Foxconn Technology Group, and it won its first solar plant order in India in 2015.

That year, India, the world's third-largest carbon emitter, had set an ambitious target to ramp up its solar power capacity by five times to 100,000 megawatts by 2022.

SoftBank-backed Findability needs 100k citizen data scientists from India

Findability Sciences, Boston's artificial intelligence company backed by SoftBank, might soon come looking for "100,000 citizen data scientists".

Founder and CEO Anand Mahurkar said the company is expanding its operations in India and aiming to attract citizen data scientists to build various applications on the AI platform.

Mahurkar said the platform would provide an opportunity to the growing community of Indian AI developers to offer their services to enterprise customers worldwide.

"It is like a kitchen, where corporate houses can create their own recipes of AI. They can come on this platform and execute their AI projects without any hassle," said Mahurkar. "Also, if I need just three days of support for my AI project, I may not be able to find the talent."

The company plans to tap industries such as insurance, banking, retail, manufacturing as well as IT services firms like Infosys, Wipro and TCS.

“While India is a big developer of AI and companies such as Infosys, TCS, and Wipro are going towards that direction, nobody is actually catering to the Indian market,” Mahurkar said. “Our (AI) technologies can be used by corporate houses without deploying too many of the resources, which are scarcely available and are expensive. Indian corporate houses need help on the use of AI and that is where our technology is going to be of immense use.”

To cater to India and address the AI adoption gap, Findability has formed a joint venture with New York-headquartered Qlytics, which specialises in scaling enterprise-wide analytics and AI development.

Qlytics provides technology to enable enterprise-grade governance and management of talent, data, tools and cloud resources. It allows organisations to effectively track AI development projects through integrated APIs (application programming interfaces) from platforms such as Jira, Slack and Github. The solution comes pre-built with AI applications that allow users to both build their own models and/or deploy a pre-trained one.

Mahurkar said his company was also looking to build its facilities in tier-2 and tier-3 towns and cities such as in Nashik and Hubli. “The (metro) cities are overcrowded. We are looking at secondary and tertiary cities to create new technologies using the resources there,” said Mahurkar, who completed his engineering in Aurangabad in 1990 before moving to the US in 2003. The firm has already formed a development centre in Aurangabad.

AI has the potential to add $957 billion to India’s economy by 2035, according to consulting firm Accenture. According to industry sources, there has been a 30 per cent year-on-year increase in the number of Indian firms setting up dedicated AI teams. However, despite such encouraging statistics, India accounts for less than 8 per cent of analytics firms globally, indicating the need for a broad-scale adoption of AI and machine learning within organisations.

Indian start-ups raised a record $14.5 bn in 1185 funding rounds this year

As the decade is coming to an end, it has seen an impressive 25x growth from a tiny $550 million in 2010 to $14.5 billion in 2019 in terms of the total funding raised by the start-ups.

This year start-ups raised $14.5 billion in 1185 funding rounds out of which 459 were Series A and late-stage investments, according to the ‘India Tech Annual Factsheet - 2019’ compiled by data analytics firm Tracxn. This is a significant jump from $10.5 billion raised by young ventures in 2018 and $10.4 billion in 2017.

There are 24 ‘unicorns’ or startups valued at more than $1 billion (each) and 155 ‘soonicorns’ or firms which hold the potential to become unicorns in the near future in the country. Out of these 9 ‘unicorns’ and 60 ‘soonicorns’ were formed this year, according to Tracxn. The latest entrants into the unicorn club included Bengaluru-based online grocery retailer BigBasket, Gurugram-based logistics startup Delhivery and Delhi-based eye-wear firm Lenskart whose valuation recently crossed $1.5 billion with the SoftBank deal.

This year Masayoshi Son-led SoftBank made massive investments in the Indian startups. The biggest funding round was raised by Gurugram-based hospitality firm Oyo Rooms which received $1.5 billion in Series F financing led by investors such as SoftBank, Sequoia and Lightspeed Venture Partners. Across the city, SoftBank along with investors like Ant Financial and Discovery Capital also invested $1 billion in digital payments company Paytm. The Noida-based firm competes with Google Pay, Amazon Pay and Walmart-owned PhonePe to tap the booming digital payments market in the country.

Business to business e-commerce, logistics and mobility companies also attracted a lot of capital from investors. This year, Delhivery secured $413 million in a funding round led by SoftBank Vision Fund. SoftBank also pumped in $250 million in Ola Electric, the Bengaluru-based ride-hailing firm’s electric vehicle arm. The deal turned the company into a ‘unicorn’ almost overnight. Another Bengaluru-based firm Udaan, a business-to-business e-commerce platform raised $585 million in Series D financing round led by China’s Tencent, giving the firm a “post-money valuation in the range of $2.5 billion.

This year the fate of the e-pharmacy segment also hung in balance due to legal hurdles. However Mumbai-based online pharmacy startup PharmEasy secured $220 million in a fresh round of financing led by Singapore state investment firm Temasek.

In terms of the most popular business models, hotel aggregators formed the top market for investments this year, followed by e-commerce logistics, online horizontal B2B marketplace and cab-ride hailing space, according to Tracxn. After these sectors, online comparison platforms for insurance, electric vehicle charging network and ‘free float two-wheeler rentals’ were other top areas that received heavy investments.

The most active venture capital investors this year in terms of the highest number of investments included Sequoia Capital, Accel and Tiger Global Management. The players such as Steadview Capital, General Atlantic and FMO were among the top private equity firms.

Some cities tend to become a hub of startups. India is no different, with the majority of companies getting founded in a handful of cities. Delhi NCR, Bengaluru and Mumbai were ranked the top three cities in terms of the places where the most number of young ventures got formed. But Bengaluru firms claimed almost half of the total equity funding raised by startups in the country, followed by Delhi and Mumbai.

Also, the key acquisitions this year included the buyout of online travel company Yatra by US-based software firm Ebix for $337 million. This year online retail firm ShopClues was also purchased by Singapore-based e-commerce platform Qoo10 for about $100 million in an all-stock deal.

The outgoing year also saw few tech companies making their debut on the stock market. Among them was Noida-based online marketplace IndiaMART which had IPO market cap of $407 million and Gurugram-based mobile marketing platform Affle which had reached a market cap of $269 million, according to Tracxn.

SoftBank's second Vision Fund is starting life a lot smaller than the first

SoftBank Group has quietly completed an initial money-raising push for its second technology fund, at a fraction of its targeted $108 billion.

The Japanese company has raised roughly $2 billion for the second Vision Fund so it can start backing startups, according to two people familiar with the matter. This stage of the fund-raising process is known as a first close, and SoftBank will continue gathering commitments. A Vision Fund spokesman declined to comment.

SoftBank said in July that its second Vision Fund would be even larger than the first, which broke records in 2017 by raising almost $100 billion. This time around, SoftBank has said it is taking more control, committing $38 billion of its own capital and replacing Saudi Arabia, which was the largest investor in the first fund.

So far, it is unclear whether there are any outside investors in the second fund. The original Vision Fund was announced in October 2016, but took another seven months for its first major closing with $93 billion in commitments.

Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co., which contributed $45 billion and $15 billion, respectively, to the first fund, are reconsidering how much to put into the new fund, Bloomberg News previously reported.

Talks with Saudi Arabia are still ongoing, said the people, who asked not to be identified discussing private matters. Mubadala recently told Bloomberg News it had yet to decide on whether it would invest.

SoftBank has said the second fund is also expected to collect money from Apple Inc., Microsoft Corp., Foxconn Technology Group and the sovereign wealth fund of Kazakhstan.

SoftBank’s second Vision Fund has made at least one investment already. It recently participated in a financing round for Chinese online property listing service Beike Zhaofang, people with knowledge of the matter said. The company previously raised $800 million from investors in March, Caixin reported at the time. A representative for Beike was not immediately reachable for comment.

WeWork and Uber Technologies Inc., two of the largest investments made by SoftBank and the first Vision Fund, have performed poorly this year. A recent summary of the first Vision Fund portfolio showed that the fair value of the fund’s stakes in transportation and logistics companies was $31.1 billion as of Sept. 30, just below the cost of those investments. The fair value of the fund’s real estate investments was $7.5 billion, below the $9 billion cost.

That’s prompted some soul-searching at the Japanese company.

“There was a problem with my own judgment, that’s something I have to reflect on,” SoftBank founder Masayoshi Son said.

Funding jitters

SoftBank's first Vision Fund broke records in 2017 by raising almost $100 bn

This time, SoftBank has said it is taking more control, committing $38 billion of its own capital and replacing Saudi Arabia, the largest investor in the first fund

Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment contributed $45 bn and $15 bn, respectively, to the first fund

The second fund is expected to collect money from Apple, Microsoft, Foxconn Technology Group and the sovereign wealth fund of Kazakhstan

SoftBank takes control of WeWork as part of bailout, Neumann to leave board

SoftBank Group Corp is taking control of beleaguered WeWork, part of a rescue financing plan that will see former CEO Adam Neuman sever most of his remaining ties with the company he co-founded, according to people familiar with the matter.

The eleventh-hour deal throws a lifeline to WeWork parent We Co, which was on the verge of running out of cash after a failed public offering in September. By salvaging one of its biggest investments, SoftBank will give a second chance to WeWork to start over under new ownership. It also tosses a buoy to Neumann, who will give up his board seat and walk away with as much as $1.2 billion as well as a $500 million credit line from SoftBank, after it pushed him out as chief executive officer last month.

Neumann is allowed to sell slightly less than $1 billion of stock to the Japanese conglomerate as part of the deal, said the people, who asked to remain anonymous because the agreement hasn’t been announced. He’ll remain as a board observer and can assign two board seats, one of the people said. Neumann will also get a roughly $185 million consulting fee. His net worth would still be at least $1 billion, according to calculations by the Bloomberg Billionaires Index.

WeWork chose the offer from SoftBank, which already owns about one-third of the company, over a competing proposal from JPMorgan Chase & Co. The deal, which values the office-sharing startup at about $8 billion before any new capital from SoftBank, marks a shocking fall from grace for a business emblematic of the latest tech boom that had been valued as recently as January at $47 billion. As part of SoftBank’s plan, one of its executives, Marcelo Claure, will take over as chairman of WeWork’s board, one of the people said. WeWork appointed Artie Minson and Sebastian Gunningham as co-CEOs last month after investors pushed back against the IPO.

SoftBank and JPMorgan declined to comment. WeWork couldn’t immediately be reached. Dow Jones earlier reported details of the deal.

SoftBank's rescue financing plan may put WeWork's valuation below $8 bn

SoftBank Group Corp. is assembling a rescue financing plan for WeWork that may value the office-sharing company below $8 billion, according to people familiar with the discussions.

The new figure is a fraction of the $47 billion valuation the start-up commanded as recently as January. The talks are fluid and the terms could change, said the people, who requested anonymity because the discussions are private.

WeWork, reeling since it scrapped its initial public offering, has been considering dueling plans from SoftBank and JPMorgan Chase & Co. to shore up its finances before it runs out of cash as early as next month. The company’s board could make a decision as soon as this weekend, according to some of the people familiar with the situation.

Representatives for WeWork and SoftBank declined to comment.

JPMorgan has been pitching investors on a $5 billion junk-debt package for WeWork. The unsecured and secured notes portion of the bank’s plan are being offered on a “best-efforts” basis, according to people familiar with the matter, meaning banks haven’t committed to funding the deal irrespective of investor demand.

The bank has been sharing its proposal with about 100 investors as it tries to line up support for what would be one of the riskiest debt offerings in recent years, people with knowledge of the matter said earlier this week.

Uncertainty around WeWork’s future has whipsawed its bonds in recent weeks. The debt plunged to record lows on Tuesday as the company weighed a financing package that included debt that could yield 15 per cent, only to erase those losses a day later amid reports that SoftBank was considering a new investment. The debt currently trades at around 85 cents on the dollar, and hasn’t been near par since before the company pulled its IPO last month.

SoftBank, which with its affiliates already owns a little under one-third of WeWork, has been in discussions to provide the company with $5 billion of funding in a mix of equity and debt. The financing would come directly from the Japanesefirm, rather than its Vision Fund, a person said earlier this week. SoftBank would not amass a majority of voting rights, though its stake would increase, the person said. Part of the package may include non-voting preferred stock.

Part of the appeal of the SoftBank plan is the office-sharing company’s longstanding relationship with the investment behemoth, one of the people said. At the same time it would further dilute existing shareholders and employees -- a consideration in favor of the JPMorgan proposal.

Softbank-backed Oyo raises $1.5 bn at $10 bn valuation for market expansion

Oyo Hotels and Homes is raising $1.5 billion from founder Ritesh Agarwal, SoftBank Group Corp and other investors as the India lodging startup expands into foreign markets such as the US and Europe.

Agarwal, 25, will spend $700 million to buy new shares in the company as part of a previously reported $2 billion plan to triple his ownership stake. Existing investors SoftBank’s Vision Fund, Lightspeed Venture Partners and Sequoia India will contribute the rest of the current round.

Agarwal, who founded Oyo in 2013, has built it into India’s second-most valuable startup with a valuation of about $10 billion. Its service covers 1.2 million rooms in over 80 countries, including 590,000 rooms in China. It entered the U.S. earlier this year and now has 7,500 rooms in 60 cities.

“We truly believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability,” Agarwal said in a statement.

The young founder made headlines in July with plans to spend $2 billion to raise his stake in the company to 30% from about 10%. Japanese banks Mizuho Financial Group Inc. and Nomura Holdings Inc. are bankrolling Agarwal’s share acquisition, according to people familiar with the deal. He is buying some of those shares from Sequoia and Lightspeed, and will carry out the transaction through an entity called RA Hospitality Holdings, Oyo said.

Agarwal is tripling down on the company he created at a time WeWork’s internal tumult and a string of disappointing IPOs are raising questions about startup price tags. The $10 billion valuation makes Oyo India’s most valuable startup after One97 Communications, the parent of digital payments pioneer Paytm. E-commerce giant Flipkart Online Services Pvt was acquired by Walmart Inc. last year in a $16 billion deal. SoftBank’s investments lifted the valuations at Oyo, Paytm and WeWork.

Agarwal founded the startup in his teens after dropping out of college and roaming India on a shoestring budget. The wild, erratic standards at hotels and guest houses he encountered inspired him to start the online service, and the brand now aims to provide travelers a consistent experience.

Oyo mainly signs on hotel owners and then helps them upgrade everything from bathroom fittings to furniture and bedding, and then provides them standardized supplies like sheets and toiletries, and support to train their staff.

It employs hundreds of people in the field who evaluate properties on some 200 factors, from the quality of mattresses and linens to water temperature. To get a listing, along with a bright red Oyo sign to hang street-side as a seal of housekeeping approval, most hoteliers must agree to a makeover that typically takes about a month. Oyo then gets a cut of roughly 25% of every booking. Rooms usually run between $25 and $85.

SoftBank to commit $40 billion to second Vision Fund, says report

Tech conglomerate SoftBank Group will invest $40 billion in its forthcoming second Vision Fund, the Wall Street Journal reported on Wednesday.

SoftBank’s board will meet on Thursday to approve the commitment, the WSJ reported, citing people familiar with the matter. While the first $100-billion Vision Fund was launched with $60 billion in backing from the sovereign wealth funds of Saudi Arabia and Abu Dhabi, SoftBank has pledged to launch its second even without such support as it markets the fund to potential investors.

The second fund has secured investment from Goldman Sachs Group and Standard Chartered

WSJ said. Goldman hopes the commmitment will help secure work on the growing number of SoftBank portfolio companies heading to the public markets, the report said. Kazakhstan’s sovereign wealth fund will also invest, the WSJ said.

SoftBank, Goldman Sachs and Standard Chartered declined to comment. Tokyo-based SoftBank can tout the 45 per cent internal rate of return made by investors in the first fund’s common shares — albeit gains that are mostly on paper.

Since the first fund’s launch its biggest outside investor, Saudi Arabia’s Public Investment Fund has been pulled further into domestic projects as the government runs a larger-than-expected deficit. Reuters 

SoftBank announces new $108-billion Vision Fund with Apple, Microsoft

SoftBank Group’s founder Masayoshi Son launched a second Vision Fund, seeking to extend his reign as the world’s most influential technology investor.

The Japanese conglomerate will commit $38 billion to Vision Fund 2 with the goal of raising a total of $108 billion, SoftBank said Friday. Apple Inc, Microsoft Corp, sovereign wealth fund of Kazakhstan and a number of Japanese finance companies are also expected to contribute capital, SoftBank said. If the fundraising meets that goal, it would be even larger than the first $100 billion effort.

Son wants to raise a new massive fund every two or three years to take advantage of opportunities he sees in cutting-edge technologies such as artificial intelligence and autonomous driving. SoftBank in June disclosed that the initial Vision Fund has earned 62 per cent returns so far after making 71 investments for a total of $64.2 billion.

And while several of its portfolio companies -- Uber Technologies Inc. and Slack Technologies Inc. -- have gone public, profitable exits might still be years away.

Saudi Arabia’s Public Investment Fund and Mubadala Investment Co., key partners in the first vehicle, were not listed among the investors in the second fund, but they are still in talks about possible investments, said Daisuke Sawatake, a SoftBank spokesman. Among the investors in the original Vision Fund, only Apple and Foxconn Technology Group have plans to contribute to the successor so far.

SoftBank has also received a memorandum of understanding from Japanese financial firms Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Mitsubishi UFJ Financial Group Inc., Dai-ichi Life Holdings Inc., Sumitomo Mitsui Trust Holdings Inc., Daiwa Securities Group Inc., and SMBC Nikko Securities Inc. Other contributors will include Standard Chartered Plc, an unnamed Taiwanese investor and the fund’s management, according to the release.

The original Vision Fund was announced in October 2016, but it took another seven months for its first major closing. Saudi Arabia was a key investor with a $45 billion contribution, followed by SoftBank’s $28 billion, and $15 billion from Mubadala. Investors also included Qualcomm Inc. and Sharp Corp. While the Saudis acted as a constraint on Son’s power at the original fund, the Japanese billionaire seems set to take a more leading role in its successor.

After decades of building his telecom empire, the 61-year-old may finally have more time to focusing on investing. He has handed over the day-to-day management of SoftBank’s domestic telecom operations, a cash-cow division that went public in December, to his long-term lieutenant Ken Miyauchi. Now the company’s Sprint Corp. unit and T-Mobile US Inc. are seeking to merge in the US.

Another question is whether SoftBank will keep up the pace and scale of investments. The first fund targeted stakes of over $100 million, in just two years amassing a portfolio of 82 world’s leading technology companies, including Uber and WeWork Cos. Ride-hailing is the single biggest segment, including stakes in China’s Didi Chuxing, India’s Ola and Singapore’s Grab. According to data from market researcher CB Insights, SoftBank Group was an investor in 24 of 377 global unicorns, startups valued over $1 billion.

SoftBank's $2.25-bn investment in GM-linked self-driving firm gets US nod

A US national security panel on Friday approved a $2.25 billion investment by Japan's Softbank in Cruise, a self-driving vehicle firm majority owned by GM, the unit told Reuters, signalling some leeway for investors with deep ties to China.

The panel, known as CFIUS, approved the investment based on fresh assurances that Cruise's technology would be completely off limits to SoftBank, whose investments in Chinese mobility firms have rattled US authorities, a source familiar with the matter said.

SoftBank plans to invest $1 billion in Piramal group, talks in final stage

Masayoshi Son-led SoftBank is in the final stages of due diligence for investing $1 billion in Piramal Enterprises, it is learnt. The cash will go to the Mumbai-based company’s financial services arm, which primarily deals in wholesale and corporate debt, a source in the know said. The deal would peg the value of the financial services arm of Piramal Group at over $4 billion, estimates suggest.

The Japanese conglomerate is likely to route this investment through its $100-billion vision fund, the source said.

The two sides have been locked in conversation for a few weeks now and the handshake agreement was done earlier last week, another source pointed out. The last details of the due diligence process are pending and the deal is officially expected to close in about two months.

This deal is a departure from SoftBank’s usual business style. While it has traditionally shied away from listed companies in India, this time the proposed investment will land in one of the listed entity’s subsidiary. With this move, Softbank will not have to do secondaries with smaller retail investors, who would have demanded a steep premium.

SoftBank did not respond to a request for comment till press time. Piramal Enterprises issued a statement to the exchanges saying, "We write to inform that no such proposal... has been placed for approval of the board or any of its committees." The company, however, did not respond to a specific Business Standard query on whether due diligence was on for a deal with SoftBank.

It is possible that the financial services company will not remain a subsidiary much longer as the two plan to set up a fintech platform, which will look to give loans across the board.

The ongoing deal may disrupt the pecking order in the financial services space, people in the know said.

Insiders believe an exit plan has been devised already.

The proposed deal could help SoftBank realize its ambition to have a big fintech platform in India, one of the sources said.

For the Tokyo-headquartered conglomerate, this is a safe choice. Piramal Group is well networked, so it won’t have to spend too much on marketing or technology. And it is likely that the spin-off entity will not have to bleed to gain market share. It also gives SoftBank an entry into real estate in India, even if it is via debt.

For the Piramal Group, it will come as a shot in the arm, according to an analyst. The Mumbai-based company has been looking to raise capital for a while and there are very few investors who could write a cheque that large. Piramal may also try to use the Oyo formula when it comes to corporate loans. That is, the company will be able to send competitors packing by simply having more capital than others. The ability to overspend dissuades upstarts and incumbents from making any aggressive moves.

Over the last eight months, there has been a liquidity crisis in NBFCs and the cost of raising capital has been extremely high, forcing lending companies to come up with creative solutions. Piramal Group’s ability to raise a large cheque could set it apart from others, a person close to the deal said.

SoftBank's market value dips $9 billion after Uber Tech IPO flops

On Thursday, as his company booked a $3.8 billion gain from its stake in Uber Technologies Inc., Masayoshi Son told SoftBank Group investors that their time had finally come. Instead, they’re still waiting.

The day after Son’s earnings presentation, SoftBank slid 5.4 per cent and fell again on Monday, as dropping as much as 4.9 per cent. Uber’s initial public offering was a flop with shares sliding on the first day of trading, at the same time the US and China escalated tensions over their trade dispute. SoftBank has lost about $9 billion in market value despite reporting last week that profit more than tripled thanks to the valuation gain from its stake in the US ride-hailing giant. Son has been remaking SoftBank Group from primarily a telecommunications operator into a technology investment firm, and his $100 billion Vision Fund has begun to show promise as a major contributor to earnings. SoftBank’s stock had rallied almost 60 per cent this year ahead of the earnings. But the slide in the past two trading days shows SoftBank will also now be vulnerable to the bad news from Son’s investment portfolio, as well as the good.

Uber opened at $42, or 6.7% below its $45 IPO price. Shortly after, it slid to $41.06. While the company briefly reclaimed almost all its losses by early afternoon, the comeback proved short-lived.

“Uber debut didn’t quite live up to the expectations, and that’s why some investors are selling,’’ said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “It’s too early to tell how sensitive SoftBank will be to Uber’s price moves going forward. But even if they fall some, that doesn’t have a direct impact on Vision Fund profits.”

The Vision Fund and SoftBank’s own Delta Fund contributed 1.26 trillion yen ($11.5 billion) to profit in the fiscal year ended March 31, or slightly more than half of the total. Investments in 29 companies showed an increase in fair value, while 12 reported a decline.

In addition to Uber, SoftBank also booked a 203.4 billion yen valuation gain from its stake in Guardant Health Inc., which went public in October, and a 154.2 billion yen gain on India’s Oyo. It also recorded a 222.6 billion yen loss due to the share price decline in Nvidia Corp.

SoftBank's operating profit jumps on OYO and Uber valuation gains

SoftBank, which is one of the biggest start-up investors in the country, observed its operating profit for the year ended March raised by valuation gains from its investments in companies such as Indian hotel chain OYO and ride-hailing giant Uber.

The Japanese conglomerate’s full-year operating profit climbed 80.5 per cent due to the rising valuations of its tech investments. Its operating profit was 2.4 trillion yen ($21.84 billion) in the financial year ended March.

Masayoshi Son-led SoftBank’s Vision Fund has over $100 billion in committed capital for tech investments. SoftBank said the value of Vision Fund’s investments in 69 firms had increased to $72.3 billion by end-March, from their $60.1 billion acquisition cost, driven by gains at companies like OYO and Uber. For instance, SoftBank recorded a 154.2-billion yen valuation gain in OYO. Last year in September, SoftBank led a $1-billion fund infusion into OYO. The firm was founded in 2013 by Ritesh Agarwal, who was then aged 19.

In April, US-based Airbnb, which operates an online marketplace for hospitality services, invested $200 million in the OYO.

The investment gave a major boost to Airbnb’s India operations and instant access to 10,000 OYO Homes properties. This month, it was reported that OYO is set to acquire Amsterdam-based vacation rental company @Leisure Group from Axel Springer for about ^370 million (Rs 2,885 crore), in one of the biggest acquisitions of a foreign firm by an Indian Unicorn. The transaction is expected to close by next month. It would help OYO to move a step closer to realising its vision of becoming a global real estate brand while maintaining leadership in the hospitality industry.

OYO, which has raised a total of $1.7 billion in funding, now claims to be the world’s sixth-largest hotel chain operating from Tokyo to Texas. The company said it has footprints in more than 800 cities across 24 countries, including the UK, US, India, China, UAE, Indonesia and Saudi Arabia.

Besides OYO, SoftBank’s Vision Fund has backed many companies in India, including Paytm, Policybazaar, Delhivery and Grofers.

SoftBank eyes $2-3 billion investment in Mukesh Ambani's Reliance Jio

Japan’s SoftBank is looking at buying a $2-3 billion stake in Reliance Jio, Reliance Industries’ telecom subsidiary and the country’s fastest-growing telco.

“For the past two years, our conversations with investors have highlighted the expectations of SoftBank investing in Jio and hence the news flow is not surprising,” wrote Pinakin Parekh, analyst, JP Morgan, in a report to investors.

Mukesh Ambani-led Reliance Industries Ltd (RIL) is interested in deleveraging its balance sheet, and reports of SoftBank’s Jio investment follow last week’s news that Saudi Aramco is in talks with RIL to pick up to 25 per cent in the latter’s refining and petchem business for $10-15 billion.

According to reports, SoftBank is conducting due diligence for its investment through SoftBank Vision Fund.

Spokespersons of both Reliance Jio and SoftBank declined to comment on the matter.

“What would be important from a stock price perspective is how much SoftBank puts in, what is the implied equity valuation of Jio, and whether the e-commerce venture is included in the Jio entity,” said Parekh.

The retail and telecom arms together contributed around 25 per cent of RIL’s 2018-19 revenue.

SoftBank has a mobile telecom business in Japan and also owns Sprint in the US. It also has a 30 per cent stake in Chinese e-commerce giant Alibaba.

Jio had a debt of Rs 76,212 crore at the end of the March 2019 quarter, and RIL may want to reduce that. It had begun the exercise by transferring its tower and fibre assets to two infrastructure investment trusts, which resulted in a reduction in liability of Rs 1.07 trillion, and issuing preference shares of Rs 78,100 crore to RIL (through the revaluation of fibre assets), according to analysts.

Jio invested Rs 21,500 crore as capital expenditure in the March 2019 quarter, and the cumulative investment so far has been around Rs 2.9 trillion.

“With most of tower and fibre (except last-mile) capex being done by InvITs, we think Jio’s capex should decline in FY20,” noted Anil Sharma, analyst, Nomura.

An analyst who did not want to be named said, “RIL may be looking at an equity investor in Jio to continue investments as it continues to keep offering services at low tariffs.”

RIL Chairman Mukesh Ambani last year announced a plan to integrate the telecom and retail entities through a consumer platform called New Commerce. However, despite analyst speculation that it would be launched this year, the management has not indicated any timeline for the rollout.

RIL has, however, continued to add a number of ancillary tech platforms like Haptik, EasyGov, Saavn and Reverie over the year to create platforms similar to Baidu or Alibaba, which offers e-commerce, entertainment, finance and many other facilities to consumers.

Uber nears deal with Softbank-led group for self-driving car unit: Report

SoftBank closed its $8 billion investment in Uber in January 2018, which gave it a 16 percent stake in the ride-hailing company and made it the largest shareholder.

The Japanese technology investment fund also has investments in General Motors Co's self-driving car subsidiary Cruise. SoftBank and automaker Honda Motor Co have invested a total of $5 billion for acquiring separate minority stakes in Cruise.

Cruise has a value of more than $14 billion despite no significant revenue and a product not ready for commercial launch.

Uber is getting ready for its initial public offering (IPO) and filed for it last week.

Toyota and Denso declined to comment, while Uber and SoftBank did not respond to Reuters' requests for comment.