SoftBank is planning to pour up to $15bn into its new technology investment fund on behalf of its own employees, topping up the contributions promised from outside investors such as Apple and Microsoft.
People familiar with the matter said a large part of the employee contributions would be funded personally by Masayoshi Son, the risk-taking billionaire founder of the Japanese group.
The exact size of employee participation has not been finalised but it will come on top of the $38bn SoftBank has committed to invest in its second Vision Fund, which has a headline value of $108bn but few confirmed outside investors.
Industry experts said it was not unusual for executives managing a fund to put their “skin in the game” but typically the amount of employee contribution would be less than 5 per cent of the total funds raised.
The outsized SoftBank participation could mean that employees take a 14 per cent position while the group’s overall contribution, which is likely to be financed by debt, accounts for more than half the headline amount.
The move comes as the Japanese group is trying to convince the sovereign wealth funds of Saudi Arabia and Abu Dhabi to invest tens of billions of dollars on top of the $108bn that have been promised by Apple, Microsoft and other unidentified Taiwanese financial groups, these people said.
SoftBank executives suggest the final figure when the new fund launches could be “a lot bigger” if it can successfully complete negotiations that are under way with other investors.
Key to SoftBank’s bullish projection is Saudi Arabia’s Public Investment Fund, which put in $45bn in the first fund and was visibly absent among the investors identified last month. PIF may contribute $20 to $30bn in the second fund, according to people familiar with the talks. Others close to the situation urged caution, saying that nothing had been agreed
“It all comes down to Saudi Arabia,” one person close to the discussions said.
The company will also provide loans to executives — such as Mr Son’s top lieutenants Rajeev Misra and Katsunori Sago — and other employees who will invest in the second Vision Fund, according to one person with knowledge of the arrangement.
The $108bn figure for the latest fund solely reflects contributions promised by SoftBank and a slate of companies whose names it revealed in late July. These companies have signed non-binding memorandums of understanding to put money into the new fund.
SoftBank is aiming to announce a first close of its latest Vision Fund by October, so that Mr Son can continue his spending spree. Abu Dhabi’s Mubadala, which put $15bn in the first fund, may look to make similar sized commitment, others said.
SoftBank had been hoping to attract a blue-chip roster of international investors, such as pension funds and others, for its latest fund. But the reliance on Saudi Arabia and Abu Dhabi highlights its inability to breakthrough with mainstream investors.
Questions over SoftBank’s relationship with Saudi Arabia have hung over the Vision Fund since the grisly killing of journalist Jamal Khashoggi in October. Vision Fund investors also baulked at an opportunity to plough more money into WeWork, the lossmaking shared-office provider, late last year.
Similar to the first fund, SoftBank and its employees were likely to be the only party contributing only equity into the fund, implying that they would shoulder the most risk from the second fund.
The Japanese company also stands to make management fees and carried interest on the fund’s investments like a typical private equity or venture capital funds.
SoftBank declined to comment. Mubadala said it was still assessing its participation, and PIF did not respond to a request for comment.
Standard Chartered Bank and Japanese financial institutions including Mizuho, Sumitomo Mitsui Banking Corp, and MUFG Bank are expected to invest only through preferred equity.
The banks’ backing is meant to act as a show of support for a deal-driven company that has emerged as one of the most lucrative fee payers for the banking industry. The investment via preferred shares would protect them from downside risk while ensuring a steady flow of dividend income.
In the first fund, investors were given a fixed ratio of the split between direct equity and preferred shares, which offered an annual coupon of 7 per cent over the fund’s 12-year life cycle. With the second fund, investors could receive a higher or lower return than 7 per cent depending on the size of the equity portion.
Mr Son said his aim with the second Vision Fund was to replicate his company’s annual rate of return, which he said was 44 per cent over the past two decades thanks largely to its successful bet on Chinese ecommerce group Alibaba.
“I am competing against my own record so my desire is not to fall below this figure,” Mr Son recently said.
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