SoftBank: piecing the puzzle together | FT Film

It has been called a telecoms group, a semiconductor group, an investment group – even a hedge fund – but what exactly is SoftBank? The FT explains why the Japanese multinational is like a jigsaw puzzle, with the enigmatic founder and chief executive Masayoshi Son at its core

What is softbank a really difficult question to answer these days telecoms group it’s a semiconductor group it’s now more of an investment group a huge and very aggressive hedge fund it is the corporate expression of one man a journey for people to ride alongside the mind of masayoshi’s son it’s like a jigsaw puzzle right at the centre of it you’ve got masayoshi-san

The 63-year-old founder of softbank he’s like no other chief executive in japan he is not afraid of taking risks he’s a risk-addicted billionaire he’s not afraid to make extremely aggressive bets if we were in a casino he’d be the guy doubling down every time he wins with his money if he’s on the blackjack table just double down double down double doubt he never

Takes the chips off the table and he just lets it ride as far as he can go he’s exploring ways to become rich exploring ways to change the world he identified technology as the way to do that in next 10 years i would continue to invest more and more he’s driven by power the desire to make soft bank one of the world’s biggest companies he’s not really into inventing

Things so it’s not like softbank creates products he’s more investing in vision if you go in the room and ask for 100 million dollars and he says well i was going to give you 500 million so why do you only need a hundred if you don’t have a good answer for the 500 you’re not getting the money he gets frustrated with us journalists he gets frustrated with investors

Who don’t value his company as highly as he thinks it should be valued he’s small physically small and he’s calm what lies beneath is this vigorous shark masai shison is born and raised in japan he left japan to study in the u.s he came back to japan using the money from a patent that he sold of an electronic translator he set up softbank in 1981 as a software

Distributor his breakthrough deal came in 2000 when he invested 20 million dollars in alibaba just the year after the chinese company was created to turn 20 million into 100 billion and more that doesn’t happen you know even the best venture capitalists in the world who put a sliver of money in airbnb or a sliver of money and google they never have hit anything

Like that he’s a kind of film script version of what happens if we all went back in time and invested in facebook on the day that it was invented and so on when the market turns on softbank the thing that keeps the market confident that it’s still worth something is that he’s still clutching on to that alibaba stake even through the pandemic we’ve seen alibaba

Only get stronger and its share prices go higher we all want to be that investor he actually was that investor what if it was a fluke did he just get lucky on chinese e-commerce you come back to the puzzle is he the world’s most astute tech investor or is he the luckiest guy on the planet he listened to jack ma’s speech for five minutes and he saw the twinkle

In his eyes and decided to invest in the company him right we’re the same animal you believe in the future he probably has the biggest guts in the world on doing investment yeah right very few people in the world have that courage too much god sometimes i lose a lot of money i don’t he had so much conviction in jack ma and what the potential of alibaba was that

All these times that it was in the money he never took a penny off the table he just wanted to ride it and he’s been proven right it’s one thing to find alibaba which is already impressive but it’s another to have the conviction to stick with it the problem is that last autumn jack ma made a pretty ill-advised speech in shanghai and it seemed to take a swipe at

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Regulators the next thing we know the share price of alibaba’s taking a really really big hit big problem there is that softbank is a 25 holder of alibaba stock and where goes alibaba goes softbank it’s kind of hard to describe softbank in one word it has so many pieces its investment portfolio is diverse it has obviously at stake in the domestic mobile business

The now separately listed mobile business that has been absolutely core and a lot of investors have invested in softbank because of the stability that this telecoms business offers the 2006 vodafone japan deal that’s a key moment because it creates a ballast to keep the company stable almost important as buying vodafone’s japan business was the decision to

Be the launch carrier for the apple iphone you have you know this outsider offering an american phone to japanese consumers and the whole question of whether japanese consumers would dump the japanese product in favor of american products like everything he does it was a gamble and it obviously paid off enormously the underlining theme of course is softbank’s

Investment the future of technology the current state of the puzzle it’s in flux because one of the key pieces is in the process of being sold which is arm you asked me four or five years ago what softbank is i would say softbank is a company with arm at the core and masa running around the world telling everyone that this company and its chip design will be

The basis upon which the internet of things will be built off of all these connected devices he didn’t have the money to pay for arm and so he needed to find people who would put money in to back the transaction what he does discover is that there’s a bunch of capital in the middle east that just wants to invest with it and that’s how we get the vision fund the

Vision fund launched in 2017 as the world’s largest technology fund the largest investors in the fund were the sovereign wealth fund of a abu dhabi saudi arabia was also a big investor it was really a marriage of mines between mohammed bin salman and masayoshi on the one hand a young authoritarian leader who’s in a hurry to transform a society and wean it off oil

Tech obsessed but is very concerned about looking like dumb money on the global stage so in comes masa and says look i’m the world’s best technology investor and i have arm and i can see the future of connected devices and you’re trying to build these mega cities in saudi arabia let’s do this together fast forward to today arms operations under softbank basically

Stung the high-tech stuff the stuff that was the future is basically a cash-guzzling cash-burning disaster if he’s nothing else he is a consummate salesman he got asked once so how did you convince mohammed bin salman to give you 45 billion dollars in an hour and he says no 45 billion dollars in 45 minutes 1 billion every minute you’ve got so much money in a

Fund you’re not just buying a little part of that industry you’re buying the future of that industry 100 billion dollars with which he can say okay okay maybe the market was one day going to come to the conclusion that this company was going to be the dominant player but i’m going to leapfrog all of that and just make this company the dominant player by pouring

So much money into it what if he says okay if you don’t take my money i’m going to go give quadruple that amount to your rival it’s not all lovey-dovey people don’t see that brutal side of masa he used capital as a weapon with the vision fund they poured money into various startups from uber dd oyo slack sent shockwaves through silicon valley and brought the

Valuations of technology companies to new heights they wanted to basically be more effective at investing than sequoia or benchmark the brand name venture capital funds but it’s really a bunch of ex deutsche bank traders who are running the show and so what do they know about venture investing so the first few years of the vision fund are marked by like enormous

Mistakes these companies weren’t making money and when it came time for them to do ipos investors weren’t convinced we had this crisis that we work that really raised questions in the vision fund strategy a office work sharing company sold into this incredible hype machine and the person feeding that hype of adam newman founder was masa’s son i don’t think he’s

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Necessarily the greatest judge of character he falls very hard in love with other entrepreneurs i think if any of us stand in a room with adam newman probably like i’d probably tone down the crazy because this is starting to look nuts masa says no be more crazy and after the pandemic struck it also showed the vulnerability of division fund with some of the major

Bets like uber and dd being hit and that led to softbank suffering its biggest ever annual loss but if you think about a venture portfolio they’re in 88 companies maybe slightly more their point is some of them will be duds some of them will be okay and some of them may be alibaba level potential maybe not the full alibaba and as long as they get enough of those

It doesn’t really matter what the other stuff does now you’ve got people so deeply involved in some area of development particularly the vision fund again that they’ve become their own peace but are never more powerful than him at the center recruited this google man called nikesh aurora indian very successful nikesh wanted masa to pay down his debt take less

Risks these two had a spectacular falling out at the same time another indian whose masa had recruited rajiv mizrah from deutsche bank his rise really begins and takes off as nikesh’s plummets he brings in a guy called sago he is goldman sachs in japan super cautious and so you’ve got deutsche and goldman sachs characters now merged you’ve got a lot of complexity

Around everyone second guessing what everyone else is up to another character was marcelo clau who was recruited into softbank and then put in charge of sprint and is now playing a major role across the portfolio the wild west is how the vision fund’s been described internally he likes a little bit of chaos and he likes a little bit of tension it’s a pirate ship

And it’s full of pirates and they’re all aggressive traitors and what you have is basically masa as the ring leader of this pirate ship they’re not coordinated they don’t get along everyone is briefing against each other that tension is all held in place when he’s there but then i think we do come back to this question of how long masayoshi’s son is going to be

In charge of this and whether softbank survives him not being at the center of that puzzle right before the arm deal nikesh leaves and this is the person that was the anointed successor masa is now 63 years old it doesn’t seem like he has a successor because so much of this company is associated with his vision that also creates a big risk for softbank the

Whole structure would collapse if something happened to masa someone could make a play for the run for the top it’s not the end of the world but it’s pretty close if you have a company that is run with such obvious deference to one person’s views you’ve got governance issues you’ve got questions about whether the board is a real board whether it can stop him doing

Something that’s manifestly insane 2020 has been crazy year for softbank masa became very exposed whose entire wealth is effectively in softbank shares when the stock of soft bank starts going down the banks who with whom he’s borrowed get very nervous so masa in the middle of march went into some crisis meetings with his key executives and eliot the hedge fund

Which has an activist stake in in softbank and has been calling for it to do share buybacks the assumption was that elliot would end up in a nasty clash with son but ultimately they wouldn’t get anywhere lo and behold the buybacks begin maybe the investors are getting somewhere maybe governance is changing with this company it triggered this massive asset disposal

Which was initially designed to carry out share buybacks and also to reduce debt to and to restore investor confidence the arm gets agreed to be sold to nvidia in a 40 billion dollar deal you have the japanese telecoms unit they announce a plan to bring down their control to raise money they have sprint which they’ve merged with t-mobile another part of the jigsaw

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Puzzle he’s very politically savvy he can strike up a relationship with most of the world’s leaders whether it’s donald trump or vladimir putin and from the moment trump was elected president masa was courting him he needed the sprint deal to get through massa goes to trump tower and says to him i’m going to create 50 000 new jobs in america i’m going to invest

50 billion dollars u.s regulators finally allowed sprint and t-mobile to merge he’d crack the code of trump now it’s flush with money so it has 80 billion in cash one thing you should never expect masa to do is to have cash in the bank account and not spend it and that’s how you get to the other piece of the jigsaw puzzle that nasdaq whale story towards the end

Of august 2020 we started to notice some quite strange stuff going on in u.s stock markets and particularly in tech stocks the nasdaq index the composite and the nasdaq 100 were both up about 12 13 over the month tesla was up 70 odd percent and amazon and google and all these stocks had an absolutely blistering run the options market is a place where investors

Can effectively bet on future stock price movements or try and hedge themselves against them the talk was of a whale a huge account people couldn’t figure out who it was that was just gobbling up these options our sort of ringing around on this led us to softbank our instincts were saying someone’s got this wrong but to our surprise it turned out to be right

Massey son says it’s actually in line with this vision because it’s investing in the future of ai and he believes that you know the big us giants like facebook amazon and google they’re all kind of the front runners in the ai race but obviously investors don’t always agree with that idea so the next day shares in softbank itself fell pretty heavily took about

Nine billion dollars off the market cap of softbank that day the strategy was being directed specifically by massason this came from the top and that tells you a lot about massason as a character he’s not afraid to take the market completely by surprise he’s not afraid to make extremely aggressive bets in markets that he doesn’t normally play in i mean veterans

In the equities options market were telling us they’d never seen anything like the scale of the bets that were going on here it started to look at a certain point like softbank was morphing into a huge and very aggressive hedge fund this is not something that’s sat easily with the market he doesn’t really respect the stock market he doesn’t really respect stock

Market investors but he needs it because he’s so aggressive that he needs the sources of capital to be risk addicted and to buy at the rate he buys really means that he borrows more than almost anyone we know and what you have is a company that constantly changes because he’s constantly experimenting it’s impossible to second guess you never know where softbank

Are going to crop up next you never know what market they might start dabbling in in huge size and with very aggressive strategies a few weeks down the road or even a few days down the road softbank could have another massive transformative deal and we’ll be talking about a new definition for softbanks kind of depends on you know where that vision that massage

Song has next he’s a gambler and he takes big risks and he’s undoubtedly successful i really don’t see a scenario where masa hoards cash ultimately we come back to the casino and the question is are you going to take your chips off the table and walk away or are you going to push it all out and go all in everything in his career suggests that he’s always all in

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SoftBank: piecing the puzzle together | FT Film By Financial Times

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