SoftBank: Spaced out
Launch of blank-cheque company will exacerbate investor concerns
SoftBank boss Masayoshi Son claims visionary status, having less to do with short-term investor concerns. Recently, he has been rebuilding his credibility by taking a break from speculative investments and selling down assets. But the Japanese tech group’s Vision Fund could undo some of that effort.
The fund reportedly plans to launch a blank-cheque company to gain external funding. No wonder, market offerings of these have more than doubled this year. Moreover, the Vision Fund has struggled to raise money for a second vehicle. But the US tech rally boosted the fund’s gains by $2.8bn last quarter, perhaps inspiring his confidence.
Mr Son, who has long argued that SoftBank suffers from a conglomerate discount, may approve for different reasons. A special purpose acquisition company (Spac) gives investors direct access to the target companies. That would avoid any financial drag from its mobile telecoms unit and Arm subsidiaries.
The risks Spac takeovers carry is that companies with less than decent prospects can gain a quick listing. SoftBank-backed house-selling site Opendoor Labs, which plans to go public through a merger with a blank-cheque acquisition company, is one example. It has struggled in the pandemic, cutting about a third of its staff earlier this year.
Mr Son seems oblivious to investor needs. Much of the 160 per cent gain in SoftBank’s share price from a March low reflects approval for its buyback programme and retreat from risky investing. It was also the group’s more sluggish units that cushioned the losses logged from a plunge in the fair value of its Uber and WeWork investments last year.
Worse, the simplified listing process Spacs offer suggests lower levels of scrutiny. A SoftBank version, given the group’s history of opaque trades and governance, will exacerbate investor concerns. Indeed, Spac returns have underperformed the broader market over the past two years, says Goldman Sachs.
SoftBank has a history of chasing popular themes — sometimes too late. At least this time investors will have had ample warning.