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SoftBank Doesn't Have an Identity Crisis. Much

SoftBank Doesn't Have an Identity Crisis. Much

News that SoftBank Group Corp. has decided to swap its ownership of Arm Ltd. for a $21.5 billion stake in chip giant Nvidia Corp. plus $12 billion in cash is a reminder that the Japanese conglomerate has come a long way from its roots as a software distributor in the early 1990s. SoftBank has already ridden the Nvidia wave once, netting $2.8 billion from buying its stock in 2017, and this looks like another show of support.

There are also reports over the weekend pointing to revived talks within the conglomerate about the ultimate bet: taking the business private, since the stock trades at a deep discount to book value. Discussion of such a gamble comes on the heels of  revelations that the Tokyo-based company may have dabbled in options to ride the recent rally in technology stocks.

Founder Masayoshi Son’s most famous punt is on his $98.6 billion Vision Fund. Like most things Son has done through his career, this was a wager largely using other people’s money. Call options confer the right but not the obligation to buy a stock at a specified price within a set time frame, and offer a cheaper way than purchasing the equity directly to speculate on a future price increase. That’s pretty much in keeping with Son’s style of using leverage to make outsize bets. SoftBank’s $13.3 billion net loss in the March quarter followed by a $11.6 billion profit the following period show how his approach has led to a wild ride.

A selection of Bloomberg Opinion columnists’ thoughts on the man, the company, and the vision:

SoftBank Gives Up Pretending It Isn't a Fund: “For investors, the reporting shift highlights the truth of what SoftBank Group has become: a fancy, highly managed fund — a hedge fund, perhaps — whose returns ought to be benchmarked against indexes of its peers and not as the technology company Son once ran.” — Tim Culpan

Does Uber Make Masa a Savvy Investor or a Shopaholic?: “Nothing cements a venture capital firm’s reputation like a good exit. After a long dry spell, Masayoshi Son is finally catching a break: The listing of Uber Technologies Inc. made his Vision Fund one of the rare investors to book a capital gain from its stake.” — Shuli Ren

SoftBank Vision Fund Writedown Isn't the Half of It: “There are bigger, deeper, and likely unrecoverable losses ahead for the world’s largest venture-capital fund. That the devaluation of its holdings might be as low as $5 billion, possibly as high as $7 billion, according to people familiar with the matter, indicates that the Japanese company has barely scratched the surface of what losses it will need to book on its stake in WeWork, let alone the rest of its portfolio.” — Tim Culpan

Masayoshi Son, Tech Visionary or Robber Baron?SoftBank’s bad year goes well beyond WeWork. Investors are starting to get the feeling that whatever Son brings to the public is troubled. And you don’t need to look far for proof: Shares of Uber Technologies Inc. and Slack Technologies Inc., both backed by the Vision Fund, tumbled upon listing. To venture funds that rely on IPOs for exits and profit, this dark suspicion is a kiss of death” — Shuli Ren

Masayoshi Son's Impatience Just Cost $17 Billion: “Son’s insistence that startups grow faster than their founders planned, and strong-arm them into taking more money than they might have wanted, has turned into a burden. And that’s become a huge liability to investors in the Vision Fund and SoftBank, too” — Tim Culpan

Time for SoftBank to Consider That Vision Fund IPO: “There are bound to be investors who believe in founder Masayoshi Son’s long-term plan to build a stable of companies that will change the world and provide  huge profits in the process. After all, many have already bought into SoftBank Group itself, which counts the Vision Fund as a key earnings driver (or drag). Given how illiquid the assets are, and the volatile nature of its earnings, a listing of the Vision Fund would certainly be seen as a bizarre move. But to Son and his acolytes, it may well be seen as visionary.” — Tim Culpan

SoftBank May Not Want Nvidia to Bite Off Its Arm: “SoftBank is under pressure from the activist investor Elliott Management Corp. to reduce the gap between the value of its holdings, which include a $172 billion stake in the Chinese e-commerce giant Alibaba Group Holding Ltd., and its own enterprise value. It may therefore want to avoid a deal that would attract drawn-out regulatory scrutiny, with no guarantee of success.” — Alex Webb & Tae Kim

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

©2020 Bloomberg L.P.