SoftBank slows down its technology investments

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You don’t need a reminder: Silicon Valley recently hit an epic low. As spectacular stocks tumble on Netflix and Meta, it’s high-profile potential start-ups that are taking the final blows.

That’s partly because SoftBank, the investment juggernaut that has served as a free-flowing money spigot for tech start-ups, is starting to slow its spending to a comparative dribble.

Green light, red light

Founded by Japanese billionaire Masayoshi Son, who amassed most of his fortune through ground-floor stakes in Yahoo and Alibaba, SoftBank has helped put start-ups like Uber and WeWork on the map through the its founder’s penchant for recruiting an army of maverick entrepreneurs with visions of industry disruption and technology-enabled economies of scale. His Vision Fund, a $40 billion tech-focused company backed by billions from Saudi Arabia and Abu Dhabi’s sovereign wealth funds, was particularly notable for adhering to a strict no-minimum rule. investment of $100 million.

The firm invested at a blistering pace last year, closing 195 deals, as reported in The Financial Times. Still, the recent tech downturn, particularly among Chinese companies, has SoftBank sweating. Its stake in Alibaba alone fell from $208 billion in November 2020 to $69 billion in March amid China’s crackdown on the tech sector. Monday, Bloomberg reported that Son advised his executives to slow down the pace of investment:

  • Almost all of the Chinese listed companies it has invested in are currently trading below their purchase price, according to FT. The billions that SoftBank has invested in online education ventures are particularly at risk after the Chinese government banned profit-making in the sector last summer.
  • SoftBank’s biggest investment in China, ride-sharing app Didi, is about $9 billion in the red, per FT reports, after Beijing launched a national security-tinged investigation into the company.

Personal issues: SoftBank shares have fallen more than 50% in the past year, and its estimated depreciation this quarter is between $20 billion and $30 billion, sources say. FT. Some analysts believe the company can raise the bar, but Son, who owns about a third of the company and has taken out personal loans against his SoftBank stake to invest in the Vision Fund, is growing “very concerned” by increasing guarantees. Maybe billionaire Son flew a little too close to the…sun.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.