SoftBank Group CEO, Masayoshi Son, is facing personal responsibility for approximately $5.2 billion due to side deals he set up at the company to increase his compensation.
The losses come after SoftBank’s Vision Fund unit reported its worst losses since its establishment in 2017, with a total loss of ¥4.3 trillion ($37.6 billion) for the fiscal year ending in March 2021.
The unit lost ¥297.5 billion ($2 billion) in the three months leading up to March, despite a global equity rebound.
The Vision Fund’s losses were mainly due to losses on unlisted startups in its portfolio. Son’s deficit from side deals grew by $5.1 billion from the December quarter to the same deals.
Son, who owns portions of SoftBank’s key investment vehicles, including Vision Fund 2, Latin America Fund, and SB Northstar, has denied any conflict of interest, although his holdings have raised concerns about corporate governance.
The Vision Fund 2 recorded a deficit of approximately $2.9 billion, while the Latin America Fund had a $463 million deficit, according to the March quarter’s disclosures. The remaining deficit at SB Northstar was ¥246.9 billion ($1.8 billion), bringing Son’s total debt to $5.2 billion.
Son holds a 17.25% stake in a vehicle set up under SoftBank’s Vision Fund 2 for its unlisted holdings, as well as 17.25% of a unit within the company’s Latin America Fund, which invests in startups.
He also owns a 33% stake in SB Northstar, a vehicle established at the company to trade stocks and derivatives. The losses raise concerns about SoftBank’s strategy, as the company has aggressively invested in unlisted startups in recent years.
SoftBank’s Vision Fund was established in 2017 with a $100 billion investment from Saudi Arabia and other investors. The fund’s investments have included high-profile companies such as Uber, WeWork, and DoorDash.
SoftBank’s earnings report for the fiscal year ending in March 2021 revealed that the company’s net income was ¥4.99 trillion ($44 billion), a significant increase from the previous year’s loss of ¥961.6 billion ($8.5 billion).
However, the results were primarily due to the sale of assets such as chipmaker Arm and the consolidation of Z Holdings, which operates the Japanese internet portal Yahoo Japan.
SoftBank Founder Masayoshi Son’s Net Worth Shrinks
SoftBank’s earnings were also boosted by gains from its investments in public companies, such as Alibaba and Uber. However, the company’s earnings from its Vision Fund have been disappointing, with losses exceeding $18 billion since its establishment.
Son has acknowledged the Vision Fund’s poor performance but has remained optimistic about its potential for success. In May 2021, Son stated that the Vision Fund would become profitable within two to three years, citing the fund’s investments in companies such as DoorDash and Coupang, which have performed well in public markets.
Masayoshi Son, the founder and CEO of SoftBank Group, currently owes approximately $5.2 billion in side deals he set up at the company to boost his compensation.
Son’s unrealized losses grew by $130 million in three months, with the majority of the deficit being linked to the Latin America fund. Additionally, his remaining deficit at SB Northstar was ¥246.9 billion ($1.8 billion). In total, his debt was calculated to be $5.2 billion based on company disclosures.
Son holds a 17.25% stake in a vehicle set up under SoftBank’s Vision Fund 2, which invests in unlisted holdings, as well as a 17.25% stake in a unit within the company’s Latin America fund that also invests in startups.
Despite his substantial debt, there is no immediate deadline for repayment, and the value of Son’s positions could improve in the future. Son has already deposited some cash and other assets into SB Northstar.
If there are any “unfunded repayment obligations” at the end of the fund’s life, which runs for 12 years with a two-year extension, the founder would pay his share.
After adjusting for his deficit from his interests in SB Northstar, Vision Fund 2, and the Latin America fund, Son’s net worth stood at $8.9 billion.
However, SoftBank’s shares fell in early Friday trading in Tokyo after the financial results, with a drop of CK% being observed, marking the biggest fall in approximately two months.
