SoftBank ponders ‘bridge’ fund to regain LP confidence, says Masayoshi Son

The Japanese tech conglomerate has preemptively spent $1.7bn from new vehicles established to hold assets that are expected to be treated as the initial investments of Vision Fund 2.

SoftBank Group will consider investing with a smaller vehicle before officially launching its second Vision Fund to regain the confidence of potential investors.

Vision Fund posted a ¥225.1 billion ($2.05 billion; €1.87 billion) operating loss for Q3 FY2019 on the back of unrealised losses on its WeWork and Uber investments, among others, according to the group’s latest earnings results.

SoftBank’s efforts to raise a $108 billion successor to its $98 billion Vision Fund were set back last year after it misjudged the value and governance of real estate business WeWork.

In a Q3 earnings presentation on Wednesday, Masayoshi Son said via translator that SoftBank could take a two-stage approach to its successor fund, though no decision has yet been made.

“Before we launch Fund 2, maybe we [will] start from [a] smaller scale and shorter period in terms of investment, as a sort of bridge to make sure that people or stakeholders feel comfortable,” he said.

“We’d like to start showing some performance with those smaller size investments and then we can find our next opportunity or challenge.”

The Japanese tech conglomerate has preemptively deployed $1.7 billion from vehicles established in Q3 to hold assets that are expected to be treated as the initial investments of Vision Fund 2. It had completed five investments for the fund as of 6 January, according to Axios.

“We can make investments by ourselves but we have partners who want to work with us so we can be flexible to both approaches,” Son added. “We know that there are some concerns among investors and some criticism […] but we also hear from our potential investors and existing investors that they want to work with us.”

Vision Fund lost $6.8 billion over the first three quarters, comprising $5.3 billion of unrealised gains and $12.1 billion of declines. As of 31 December, the vehicle held 88 assets purchased at $74.6 billion and valued at $79.8 billion.

SoftBank reported ¥55 billion of net income for the three-months to 31 December, less than one-tenth of its ¥698 billion for the same period in 2018.

New York’s Elliott Management, the activist fund founded by billionaire Paul Singer, acquired a nearly $3 billion stake in SoftBank earlier this month, Reuters reported. Son confirmed that he’d met with Elliott in recent weeks to discuss proposed changes including stock buybacks.