SoftBank plans to lend employees $20bn to invest in new fund

19 Aug 2019255 Views

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Masayoshi Son, chair and CEO of SoftBank Corp. Image: Imagechina-Editorial/Depositphotos

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On top of offering employees loans to invest in its new Vision Fund, SoftBank will contribute $38bn.

On Sunday (18 August), The Wall Street Journal (WSJ) reported that SoftBank has plans to lend CEO Masayoshi Son and other employees up to $20bn to invest in the company’s second giant VC fund, the Vision Fund 2.

Earlier this month, The Financial Times reported that this $108bn investment fund will start spending within the next three months.

People familiar with the matter told the WSJ that Son may receive up to $15bn of the loan, leaving the remaining $5bn to employees to buy stakes in the Vision Fund.

According to a source who spoke to the WSJ, the loans will have an interest rate of around 5pc. The company has around 400 employees, but it is not clear what percentage of employees will be able to avail of the company loan.

Executives “feel that such a step will make employees more accountable as the investments of the fund can be cancelled if a manager leaves or is found to have engaged in a reckless deal”, according to the reports.

Vision Fund investments

Last month, SoftBank revealed plans for its second Vision Fund, which included a $38bn investment from SoftBank, as well as commitments from Apple, Microsoft and the government of Kazakhstan, to name a few.

Financial News London wrote: “Adding in its own contribution to the second fund of $38bn, SoftBank could make up more than half of the money raised, far more than is typical for a fund sponsor.”

But the publication also noted that a handful of SoftBank’s largest investments from the first Vision Fund have been struggling in recent weeks.

Uber, which reported losses of $5bn in the last quarter, went public in May. Shares in the company have dropped 30pc since then. WeWork, another company that received Vision Fund investment, has also disclosed large losses recently. In the first half of 2019, the company lost almost $700m.

However, Slack, Oyo Rooms and DoorDash, which are all recipients of investment from SoftBank’s Vision Fund, reported valuation gains this year.

SoftBank’s CEO, Son, reported that the Vision Fund had seen 62pc of investment returned. The first fund’s $66.3bn investment in 81 firms is now worth $82.2bn.

Masayoshi Son, chairperson and CEO of SoftBank Corp. Image: Imagechina-Editorial/Depositphotos

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com