11 comments

  • maximente 1683 days ago
    there's reason to believe SoftBank is gonna go "boom", and in a big way:

    - they have tons of illiquid assets (equity in startups and early stage companies - hard to shed - see later)

    - SoftBank Vision Fund "borrows" from its huge illiquid assets (Uber + other SV stuff) in order to make the market by throwing around insane amounts of cash ($billions); in other words, they make their own markets in order to pump up their valuations but the underlying thing is fantasy-land VC goop (see any problems here?);

    - the only way to shed many of these assets are with buyouts or IPOs and the most recent ones haven't been great (the 'big names' of which [UBER, LYFT] were treated like hot garbage even shorted by IPO underwriters in case of UBER) so it's not like this garbage can be punted to someone else

    - SoftBank routinely sells assets to its Vision Fund and uses shady stuff like this in order to provide non-standard accounting; we have no idea what their financial health is due to a maze of non-standard reporting

    - SoftBank owns over half (!!) of Japanese corporate bonds

    - they have insane amounts of debt - "¥15.7tn ($143bn) of interest-bearing debt and ¥27tn of total liabilities, far greater than its ¥11.6tn market capitalisation"

    as best i can tell this is approaching Ponzi territory. once more greater fools wake up to the fact that VC isn't all the rage, get the hell out of the way of anything that SoftBank touches.

    • thewarrior 1683 days ago
      I have a conspiracy theory kicking around in my head that Softbank might be a money laundering or tax saving scam of some sort.

      Why else would you invest 300 million in a dog walking app ?

      • gomox 1683 days ago
        It's a pretty standard interpretation that the Softbank funds are a vehicle to deploy capital that is otherwise hard to invest (because of political controversy, dubious origins, etc). That's why they can afford to throw cash around so liberally.
        • thewarrior 1681 days ago
          So startups are like the art market now ...
    • neural_thing 1683 days ago
      I don't think softbank owns half of Japanese corporate bonds. It may be that its bonds account for over half the market.
    • oarabbus_ 1683 days ago
      Aside from the corporate bonds, how do these points differ much from other similar megacorps or investment banks?
      • whatok 1683 days ago
        Neither acts as a VC fund that is forced to overpay for things since it has too much capital to deploy.
  • tumetab1 1684 days ago
    This smells like walking into bankruptcy.

    SoftBank was missing some billions for its own new fund and the solution is create debt to fund the fund. Since it's illegal for themselves to invest in their own... they workaround it through it's own employees.

    If a workaround/scheme is required to obtain enough capital for the fund... that means that either there isn't enough capital in the world or that the owners of such capital don't believe in the fund.

    The important question is why it's better to resort to this scheme than to not have enough capital for the fund?

    • bsaul 1684 days ago
      OP says SoftBank contributes for 38b to their own 100b fund directly, so i don’t think your explanation is correct...

      Plus they apparently did the same thing in their first fund a few years ago.

      • tumetab1 1684 days ago
        Correct, thanks for that note.

        It seems that SoftBank wants to fund directly 38b$ and indirectly 20b$ through employees.

        In the first fund SoftBank contribution seems to have been 28B$ in a total of 93$B.

        It seems that SoftBank is having a hard time getting the Saudi Arabia to invest again in the new fund. In the first one they put 45B$.

        • jacquesc 1684 days ago
          Do you think they're still trying to get more Saudi money after the Jamal Khashoggi government sponsored murder? VCs need to be smart about their LPs. Idealistic startup founders / employees (the one's VCs tend to invest in) don't want to take blood money for their company.
          • JumpCrisscross 1684 days ago
            > Do you think they're still trying to get more Saudi money after the Jamal Khashoggi government sponsored murder?

            Yes. There has been zero backlash against SoftBank or Saudi-backed VCs from companies or consumers.

  • rococode 1684 days ago
    Tangentially related: Could someone explain to me why SoftBank often seems to be the only major company playing in the "traditional" VC space? We hear of the "SoftBank round", but not, for example, the "Microsoft round" or the "AT&T round".

    Relative to many companies, SoftBank is not so big. And the bigger companies do have VC-style subsidiaries set up (e.g. Microsoft's M12). But SoftBank seems to make the highest profile investments by a significant margin. Is there any particular reason for this? Are they simply more tolerant of risk and therefore write bigger checks?

    • rlucas 1684 days ago
      Softbank deals are hardly what I would call VC-style -- certainly not "early" or even "mid stage" venture. Their very size tends to require much later-stage deals to absorb the large check sizes. This is growth or borderline "mezz" or "PE" frankly.

      In contrast, Microsoft Ventures / M12 will do proper early-stage venture, doing a check of $2 M or $5 M or $10 M into a growing but still uncertain company.

      Source: I have done single-digit $M deals with M12 and am a VC.

    • mushufasa 1684 days ago
      Softbank isn't really a traditional company. And it's not really a bank. It started as a kindof publisher for software ("software bank"), so it has a lot of expertise in identifying and distributing new technologies, and it's essentially acted as a holding company for tech investments (including alibaba) since 2000. Really it's the manifestation of Masayoshi Son, who is an incredible entrepreneur, technologist, and investor.

      Apple+ more invest in the Softbank Vision fund, so the "SoftBank round" is already what you are thinking.

      • KptMarchewa 1684 days ago
        >Apple+ more invest in the Softbank Vision fund, so the "SoftBank round" is already what you are thinking.

        Yeah, but by doing this they essentially outsource the process to Softbank.

        I'm assuming OP is curious why they won't make the decisions themselves.

        • mushufasa 1684 days ago
          The Vision Fund is, among other things, the manifestation of the idea that an order of magnitude more scale will qualitatively change VC investing.

          VC funds historically have been in the hundreds of millions, so you can invest up to tens of millions in any one company to keep a balanced portfolio.

          SoftBank's Vision is in the hundreds of billions, so it can invest up to hundreds of millions.

          This means they can single-handedly shepherd companies across the 'valley of death' or out-spend the competition to reach critical network effects... Essentially instead of just making bets, they're tipping the scales.

          The point of this strategy is the scale, which is only possible by raising billions from sovereign wealth funds and mega corporations.

          No one company could do it. Apple's net income last year was ~$60 billion.

          The Vision Fund launched with $100 billion.

          • Illniyar 1684 days ago
            >No one company could do it. Apple's net income last year was ~$60 billion.

            Apple has somewhere around 250 billion cash on hand, so they could definitely launch a 100$ billion fund on their own.

            Microsfot has about 150B. Google about 100B . Lots of companies can theoretically build such a fund.

    • gnulinux 1684 days ago
      I work in a SoftBank invested company. SoftBank started investing in us when the company was already ~7 years old and had a pretty high market share, with established technology, big customers etc. So, SB investment is not necessarily an early stage investment. Unfortunately, I don't know if our case is pathological or the common case.
  • 5822130027 1684 days ago
    It's important to understand what SoftBank is, and why betting against them is a bad idea.

    Globally we are going through a period of deflation.

    Japanese Banks have been dealing with this problem for 30 years now.

    BOJ can print money ( yen ) and flood the world and the value of the yen would still go up !

    The reason is there is a lot of latent demand for Japanese exports.

    When Softbank invests in lets say India, ( through Uber drivers ), and suffers losses.

    The yens released ends ups creating demand for Japanese export.

    From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products.

    It's hard to understand initially - but don't be surprised to see Softbank clones propping up in Europe in 10 years - once the EU has been completely battered by deflation.

    In the US you might yet see the largest types of these funds in the future once the US govt. decides it wants some fiscal spending.

    • Traster 1684 days ago
      I'm really not understanding this. What you seem to be saying is that when Softbank succeeds they get to own a load of tech companies. That's great, that's the upside of any VC.

      Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic japanese manufacturing industry, but it's not going to help softbank.

      But also to take your example, Softbank blows a load of money in India on Uber, those Indian Uber drivers go out and buy japanese cars. But it's not like 100% of the cash you're putting into Uber goes to Japanese car companies. It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy.

      I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always, that doesn't seem correct to me - but I really don't know enough about it. Surely there must be downside? Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects?

      • 5822130027 1684 days ago
        If you want a full comprehensive understanding of what is going on I highly recommend :

        - https://www.amazon.com/Princes-Yen-Central-Bankers-Transform...

        There is a huge overlap here with MMT ( Modern Monetary Theory ), but the book was published way before MMT become more widely read. Richard studies what happened in Japan from an economic history prespective. ( I will do a dis-service to the whole topic trying to explain everything in a few sentences, but I will try to answer specific point raised ).

        > I just don't understand, because what you seem to be saying is that for a primarily export based economy, you should just print money always.

        As an exporter you cant help but accumulate FOREX. so the value of the yen would always head north, if you want to stay a top exporter you have to constantly print money to balance out your FOREX accumulation.

        > Surely there must be downside?

        Nope, no downside when you build capital goods that everybody else wants.

        > Normally I'd say this maps to inflation and squeezed living standards- but are we just no longer seeing those effects?

        inflation happens when aggregate demand > aggregate supply. If you are not supply constrained then inflation wont happen regardless of how much money you print.

        Japan specifically could print unimaginable amount of money and use it to create whatever technology they want.

        Technology acts as an accelerator to this deflation doom loops, since these technology products further increase supply or reduce cost.

        You might have hard limits due to physical commodities like oil. But technology has been able to squeeze even more value out each unit.

        > Where I'm not understanding is you're saying when they fail, the money they've lost has gone into stimulating demand for Japanese goods and kept the currency low. But firstly, that's still them failing - the company will fail, ROI will be low. It might help the domestic Japanese manufacturing industry, but it's not going to help softbank.

        Japanese banks are very much interwoven with their state, softbank might get certain lending quota from BOJ that they must lend out. Remember if Japan doen't print yen and spread it around then their deflation problem gets worse. My personal opinion is Japan should pay attention to their domestic proverty problem, they could just implement UBI, but having too much Yen domestically wont solve their deflation problem. The last time they tried helicopter money, everybody just bought government bonds, making the problem worse ! So they might prefer to figure out to create demand in foreign markets.

        > It's probably not even 5% - the vast majority of the money will be going to stimulate the Indian economy.

        I do not think Japan really cares if the Indian economy is stimulated or not, they just want there to be healthy demand for Japanese products, printing money and lending it out and then suffering some loss might even be preferable to having a large marketing and advertisement industry like we do in the West.

        • navigatesol 1684 days ago
          >Japan specifically could print unimaginable amount of money and use it to create whatever technology they want.

          And they're not doing this because...?

          We are living in truly dangerous times if people actually buy into this nonsense.

          • lowdose 1684 days ago
            You are completely right. This sounds like a fringe academic theory from someone without skin in the game.
            • corodra 1683 days ago
              Fringe academic theory is being generous. This is more someone watched that ten minute cartoon YouTube video on "how centralized banks really work" and now think they're economic experts.
          • 5822130027 1683 days ago
            Japan was doing this ! till the 1980s - until the Plaza accord when their currency was artifically propped.

            Japan was way too successful as a planned centralized economy.

            Japan can't do it anymore because it would violate international treaties they signed with the US and EU.

            Specifically the BOJ has been trying to shake Japan off from a centralized cartelized economy to a market based economy, but it's not easy to change structural conditions.

            Have a read on Richard's work, he spent 10 years in Japan with the BOJ.

            The wildcard is China, who really do not care what anybody thinks about what they do.

            So it will be interesting to watch the US / EU deal with deflation, low growth.

            While China continues to march ahead in technology.

        • selimthegrim 1684 days ago
          How is this any different from the Japanese real estate buying sprees of the 1980s?
    • mrep 1684 days ago
      > Globally we are going through a period of deflation.

      What? Pretty much every country has inflation [0].

      > BOJ can print money ( yen ) and flood the world and the value of the yen would still go up !

      That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop.

      > From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products.

      So you're saying Softbank doesn't actually care about their return on investments and is really in it to boost Japanese exports? Softbank is big but there's no way any secondary effects from their vision funds investments will return more money to them than the initial investments. Not only that, but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment.

      [0]: https://en.wikipedia.org/wiki/List_of_countries_by_inflation...

      [1]: https://en.wikipedia.org/wiki/Helicopter_money

      • 5822130027 1683 days ago
        > That is definitely not true. If they were to print 518,755,944,000,000 Yen (2017 estimate for their gdp) and flood the market with it (say by giving every citizen an equal share as a lump sum a la helicopter money [1]) the value would certainly drop.

        Are you sure about that ? What if there is no demand ? Japan did try helicopter money, and all their citizens just purchased bonds increasing public debt, without creating any inflation or causing the yen to drop.

        BOJ has been actively trying to make the yen fall.

        I agree if BOJ hands everybody in the world a large amount of Yen, then the yen would drop ( initially ), but suddenly every Japanese factory would have to start churning out all types of Japanese widgets - it would roar Japan back into 6% growth, and at the same time cause a world wide collapse of demand for European / American / Chinese / Korean exports ( cars, electronics. toys ).

        So do you see why other industrialized countries might not allow Japan to just hand Yen out to foreigners ? Japan would be "exporting" deflation to other industrialized countries.

        Over time as the world absorbs Japanese imports / standards and abandons everything else - there would be no demand for lets say FCC approved electronics.

        American students who now have access to yen might go to Japan to study programming instead of American colleges and learn Prolog.

        Take this to it's logical conclusion and in a decade the value of the Yen goes up in relation to the Korean Won, Euro, USD.

        Of course this is a fantasy, but since you started with a hypothetical, I had to point out how your conclusion might be wrong. Especially since this is exactly what the Japanese have been doing post WW2, the Americans post Bretton Woods with euro dollars, and now the Chinese are flooding the world with the RMB.

        > but your also effectively saying that they were able to swindle 40 billion dollars from the Saudis and I say swindle because the Saudis don't care 1 bit about Japanese exports and are 100% in it for the initial return on investment.

        The Saudis have been swindled already when they bought US treasuries, with QE and low yields. They could have owned assets that when up in value due to QE but guess what ? all of it was owned by Americans.

        This is why the Saudis have abandoned the treasuries market, so have the Chinese ( they are spending it on the Belt and Road ).

    • blankaccount 1684 days ago
      Can you elaborate a bit on the part between Softbank spending on India's uber drivers resulting in an increase of Japanese exports? Is it just that there is a desire for Japanese products in India, but not enough cash?
      • vmurthy 1684 days ago
        Not OP but here's one way:

        Softbank invests in Uber India pushing up automobile demand[1]. Indian drivers buy cars manufactured by Maruti Suzuki (54% market share [2]). Maruti Suzuki is a JV between an Indian company (Maruti) and Suzuki (Japan) where-in Maruti pays 6% of sales as royalty for design and other facilities. In addition, you have to realize that Japan exports $35b of auto parts and $101b of automobiles [4]. So any lever which pushes up sales of automobiles in any nation is bound to have an impact on exports.

        [1] https://economictimes.indiatimes.com/small-biz/startups/dema...

        [2] https://auto.economictimes.indiatimes.com/news/passenger-veh...

        [3] https://economictimes.indiatimes.com/markets/stocks/news/low...

        [4] https://oec.world/en/profile/country/jpn/

        • thrwo132123 1684 days ago
          +1 Indeed, one of the reasons for the current auto-slowdown in India appears to be the drastic decrease in benefits offered by Taxi aggregators, which is hitting taxi drivers hard. Can't complain, since taxis saturate the roads in Bengaluru already.
          • r_singh 1684 days ago
            > taxis saturate the roads in Bangalore already

            In Indiranagar (a popular, hip neighbourhood in Bangalore), you might have to wait for an hour to get an Uber or Ola, on weekday mornings too! Hence a lot of people are using Yulu (India's Bird).

            • vmurthy 1684 days ago
              Add HSR Layout to that list , too. I’ve started using a combination of Bounce( two wheeler point-to-point rental ) for <2km travel , public transport for longer distance travel and cabs as the last option.
        • navigatesol 1684 days ago
          Okay, now where does all the demand for these Indian taxi services come from that are actually going to pay for all of these automobile imports? It's not like Uber demand is insatiable. The notion that investing in Uber is going to drive the auto industry (which is completely contrary to the mission of these transportation companies) is an odd one.

          I can see that, at the margins, a company can spend money where it thinks it it can receive complimentary benefits. But this idea that you can spend your way into riches is a fallacy.

          So, I think we agree on some things, mainly that Japan is printing money and Softbank is a beneficiary and is using that cash to spread around the tech industry. Cheap money. Except I think it will backfire, eventually.

          • 5822130027 1683 days ago
            Most of your understanding of how money operates is a legacy of the gold standard, ( A large part of neoclassic and austrian economics is ).

            Lets take some of your conclusions to its limits shall we ? and see how much predictive power it truely has.

            In 2008, why did the Fed print 4 trillion USD ? If we cannot spend our way to riches, surely the fed should have shut the liquidity taps ?

            If the Fed did stop the liquidity taps - it would have caused a second great depression like event, surely we cannot spend our way to being rich ? Many people in the 1930s would have agreed with you !

            You could argue that "The fed has made the situation much worse and the chickens will come home to roost".

            I do not see any chickens 10 years in, do you ? in fact everything seems to prove the amount of money printing was not enough due to non-existant inflation and outright deflation.

            Lets go back in time to the 10th Century, to the origin of fiat currency - the emperor of china build the great wall, how did he pay for it ? well he just issued paper money to create new purchasing power which allowed him to build his wall.

            1000 years in - we just sit back and admire how it was possible to build such an engineering marvel in ancient times.

            ------------------------------

            The chinese have a much more sophisticated understanding of money ( they were the ones who invented it after all ) - and they are using it to build railways, cities, supply chains, ....

            1000 years in hopefully we are not ruled by people who do not understand the role of money in a modern state or else we will be left wondering how china was able to pay for terraforming Mars and turn an entire new planet chinese.

        • 5822130027 1684 days ago
          Exactly.
  • pascalxus 1683 days ago
    Based on where equities are and where the bond market are, you're going to have one hell of a hard time trying to get 5% return on the loans they're handing out. Take a look at some of the projections on 10 year returns for equities and bond market. The 2018 Vanguard report shows equities will return 3% real return over the next 10 years, and there are many estimates lower than that. Bond prices are also at all time highs. I wouldn't even take this loan if it were 2%.
  • mcthrowaway123z 1684 days ago
    Sure we'll pay you, but the only place you can shop is the company store.
    • cthalupa 1684 days ago
      No. There's no requirement they invest the loans in the Vision Fund. Nor is there a requirement to take out the loan.

      We already see something similar at law firms - partnership in a firm means literally buying into it, and one of the perks you receive at many law firms is the ability to take out a loan at favorable rates, particularly to help with said buying in.

      • C1sc0cat 1683 days ago
        I haven't heard of "partners" anteing up (paying) to become partners before - if you think about it this would favour "Tim nice but dim" with a rich mummy and daddy.
        • vikramkr 1683 days ago
          You sort of have to pay to become a partner to buy your equity share, that's just how it works, and as the other poster said, you can get a loan from the partnership to pay for your partnership buy in
          • C1sc0cat 1683 days ago
            I checked that and I don't see that requirement for Goldman Sachs or any other partnership set up - the potential for corruption and nepotism is huge if its pay to play.

            Some form of coops Mondragon for example do but that is a very different type of employment.

            • vikramkr 1683 days ago
              Goldman sachs isn't a partnership, and the potential for corruption and nepotism is always huge in any structure. That's why they extend loans to new partners, but the whole point is that partners no longer take salaries, they are equity holders in the actual firm, and they're obviously not going to let just anyone become a partner because they have money. What exactly do you see as the difference here between having to buy your way into the partnership after the other partners vote and then taking equity versus being promoted to partner after the other partners vote and then taking a salary? Who exactly is supposed to own the law firm in the second case if not the partners?
            • qwhelan 1683 days ago
              Goldman Sachs hasn't been a partnership since they IPO'd. They just use "partner" as a title for legacy reasons.

              In general, a partnership is a collection of equity owners ("the partners"). To become a partner you have to buy equity, usually sold by a retiring partner.

              Sometimes "new partners" are created by diluting the stock; this is generally avoided unless the person is expected to grow the business by at least that much.

            • phyalow 1683 days ago
              Goldman's partnership today is that in name only. Prior to the firms IPO new partners did indeed have to buy their way in (via loans!).
              • C1sc0cat 1683 days ago
                The full value? GS was huge even before the IPO no individual could ever expect to buy the value of their share surly?
                • phyalow 1683 days ago
                  I think anecdotally it was around 6-800k USD, which could be covered no problem with a few years of contributions from salaries and bonuses. Basically its just company equity that you are buying. The amount can be token but you are still a "partner".
      • mcthrowaway123z 1683 days ago
        And enjoy taking vacation with our brand new unlimited vacation policy.
  • herostratus101 1683 days ago
    Can someone explain to me how this is not like that episode of Arrested Development where they steal a dollar from the banana stand and then throw out a banana to "cancel it out"?
    • vikramkr 1683 days ago
      Of course it's nothing like that. That was one dollar, while this is 20 billion.
  • nobrains 1684 days ago
    Can someone explain the economical incentives behind this and how it helps SoftBank and the employees?

    I understand what they are doing but I don't understand how it will work to succeed.

    • mushufasa 1684 days ago
      5% for a loan is pretty good these days if it's low risk. With yields way down and now negative, it's hard for companies to make use of cash reserves. If SoftBank has cash, and they know that employees are making way above 5% returns on average (cough Vision Fund), then it seems like a good investment.

      For example,

      0) SoftBank loans extra cash to Masayoshi Son.

      1) Masayoshi Son invests a portion in the next Vision fund which makes 40% returns, and the rest in safer strategies (public equities, long-term debt)

      2) Masayoshi Son makes a killing, has no trouble repaying the loan.

      3) SoftBank just grew their cash reserves well above the market rate.

      The key assumption here is 2). But since this is a loan, and Masayoshi Son invested most of the money in safe investments (and has a lot of wealth anyways), even if the Vision fund underperforms, SoftBank can be confident they can still make money back (step 3). They're using their advantages to build their own unique loan product.

      • joosters 1684 days ago
        Why bother with the middle man? If Softbank is so confident that its vision fund is going to make much bigger than 5% returns, it should be putting the money directly into there.

        The fact that it doesn't do this is a little ominous. Why does it believe that it will get a better return by loaning out cash at 5% rather than investing in its own fund?

        • goatinaboat 1684 days ago
          Why bother with the middle man? If Softbank is so confident that its vision fund is going to make much bigger than 5% returns, it should be putting the money directly into there.

          This is a perk for employees. Stock options/RSUs on steroids. It’s nothing more complicated than that.

          It’s unusual to do it this way in tech but in big accounting and law firms giving favourable loans for people to “buy into” the partnership is business as usual.

          • joosters 1684 days ago
            Yes, this is more convincing, but is still a little concerning. Given current interest rates, presumably these people 'gifted' the 5% loans could have already borrowed money at lower cost, they just wouldn't have had any access to throw the money into the vision fund.

            Perhaps the borrowers can take the cash, invest it, then borrow elsewhere at lower rates to pay back the more expensive loan? In all, it still seems a vastly complicated scheme for the attested goals. I guess that there are tax reasons behind it all.

        • ackbar03 1684 days ago
          I find this strange too. I think they're trying to reduce risk. This basically transforms what would otherwise be an equity investment into a debt investment which lowers overall risk
        • mushufasa 1684 days ago
          Because you can't just take corporate cash and invest it in a private equity fund.

          Fiduciary duty requires low risk products, and liquidity. Generally that means long-term debt (e.g. t-bonds) or 'corporate paper' which are nearly risk-free. Those yields are 3% or lower, certainly less than 5%. The risk profiles are about as far away from a VC fund as can be.

          Generally a personal loan would be way too risky for corporate cash -- so this is actually an incredible show of confidence in the Vision Fund!

          • hollerith 1684 days ago
            >Because you can't just take corporate cash and invest it in a private equity fund. Fiduciary duty requires low risk products, and liquidity.

            I call bullshit. Specifically, what you wrote is not remotely true under US law or under Japanese law.

            A company's managers have very broad leeway to spend the company's cash however they like. In fact, if the cash, treasuries, corporate paper, etc, of a company starts to pile up over the years, the markets tend to take that as a sign of managerial incompetence or at least managerial lack of vision.

            Anyone that can buy and hold shares in SoftBank can also hold cash, treasuries or corporate paper directly. In other words, SoftBank's investors don't need SoftBank to hold cash, treasuries or corporate paper on their behalf; they invest in Softbank because they expect that SoftBank has a more ambitious plan than that. Creating and selling the iPhone is an example of an ambitious plan that turned out extremely well for investors in the company with that plan.

            If that argument is not persuasive enough, consider this concrete counterexample to your claim: for 6 years, Google had a venture-capital arm:

            https://en.wikipedia.org/wiki/GV_(company)

            Specifically, although GV is currently owned by Alphabet, for a period of 6 years before that it was owned directly by Google (under the name Google Ventures I believe).

            • mushufasa 1684 days ago
              can't as in "that asset class does not meet the risk and liquidity requirements for cash management in general"

              not can't as in "de-facto illegal."

              dereliction of fiduciary duty is illegal, of course the circumstances matter.

              I think you are conflating capex + investments with overall cash management.

              They already invest a lot in the vision fund. This is a way for them to route more money into the vision fund on top of what they already invest, by tapping into an additional asset class within their portfolio allocation.

              If a company's portfolio is a high percentage of cash management products, that's a bad sign of low innovation. If the portfolio is too low a percentage, that's a bad sign also because they would be unable to access liquidity to cover operations given a downturn or sudden need for capex etc... Different companies have different allocations but healthy companies (including google) have allocations into a diverse bucket of asset classes...

              > consider this concrete counterexample to your claim

              The fact that Google also has a VC arm is not a counter argument. Google allocates some amount of its cash into cash management products as well.

              > SoftBank's investors don't need SoftBank to hold cash, treasuries or corporate paper on their behalf

              Their customers do. They're still a major telecom company in Japan -- they certainly have operations they need to protect.

              • hollerith 1684 days ago
                >Different companies have different allocations but healthy companies (including google) have allocations into a diverse bucket of asset classes

                OK, but that's different from your "you can't just take corporate cash and invest it in a private equity fund". If you'd written instead, "having their employees carry some of the equity risk is a way for SoftBank to increase the size of the private equity fund while continuing to make sure that they have enough cash to continue operations", I wouldn't've felt the need to call you out.

                I don't know enough about Japan to say, but if it were a US company making this move, I would be more inclined to believe that the loans are mostly intended as a perk for employees like this comment claims: https://news.ycombinator.com/item?id=20736072

              • vikramkr 1683 days ago
                This isn't dereliction of fiduciary duty. It's not illegal for a company to go bankrupt or to spend all of it's money on highly risky investments and lose it all as long as it is done in good faith, and there aren't any magical guidelines for risk and liquidity requirements that companies have to accept legally. Management can do whatever they think is the best thing to do for the firm that doesn't break the law.
              • hollerith 1684 days ago
                I agree that a company needs to make sure it has enough cash and cash-like assets to cover their expenses. Failure to do so has often resulted in the dissolution of the company although it is very rare for that to be the root cause of the dissolution of a public-traded company of SoftBank's size. But again management has broad leeway here. Can you cite one example of a company that was sued because management ran out of cash and cash-equivalents?

                When you say "fiduciary duty", you imply that the company can be sued.

              • C1sc0cat 1683 days ago
                A company that held ALL its cash in a back account would be failing its share holders.

                I think maybe you misunderstand what "fiduciary duty" means here.

          • phyalow 1684 days ago
            >>"Because you can't just take corporate cash and invest it in a private equity fund." Says who? And yes you can, indeed read their financial statements, SB Holdings is a principal investor through and through. It is the directors duty and their imperative as good corporate governors (a rare phenomena in Japan) to deploy and allocate capital in the most efficient manner possible to the highest return opportunities. This reeks of cronyism. The vision fund is a mess of hand marked low/negative free cash flow generating businesses, check out their share price performance in 2001, for a preview of what's to come.
      • danvoell 1684 days ago
        And if the Vision Fund doesn't generate profitable returns? How levered are the employees?
  • matt2000 1684 days ago
    Bad idea: Being dependent on a single company for your salary while also holding mostly that company's stock in your investment portfolio.

    Worse idea: Also investing in that same company's highly risky VC fund.

    Worst idea: Borrowing money to do so.

    • ComputerGuru 1683 days ago
      So what superlative do we use when the entity you are borrowing money from is the same company you are investing that money back into!?!?? Most worst? überbad? Ponzi?
    • mv4 1683 days ago
      Softbank's deals - Sprint, WeWork, and now this - make me question their financial intelligence.
      • mrnobody_67 1683 days ago
        Their last Uber investment is under water... wouldn't be surprised if the $2b in WeWork stock they purchased is crushed as well at IPO time -- but at least they didn't follow through with the $8b they initially promised to Adam.
        • onlyrealcuzzo 1683 days ago
          I read that SoftBank structured their investment in some way that they made money on the IPO even though the price was below what they bought in at.

          It didn't really make any sense to me, but I wanted to ask here:

          Is there any truth to that? And if so how did it work?

          • charlesdm 1683 days ago
            I think they also bought common stock?

            During private fundraising, investor (vs founder) stock generally has preferred rights when the company is sold and/or liquidated. There might also be restrictions on who and how someone can sell their common shares. This depends on the investors and the terms that were negotiated during fundraising.

            So common stock generally is sold at a discount because it doesn't have any of these protections, and it's basically last in line to receive any payout.

            However during IPO, often preferred stock converts into normal common stock so that it can be sold to Joe Smuck (or their pension fund institutional) investor.

            Hence it's an arbitrage play; you purchase common at say a 30% discount in a late round and then sell it on the market for full price.

      • charlesdm 1683 days ago
        Ah, but Alibaba...
    • charlesdm 1683 days ago
      Unless Softbank is willing to lend said money unsecured to a limited liability SPV without a personal guarantee. I can't imagine that all these people are taking on personal debt to invest in the vision fund.
  • xxxpupugo 1684 days ago
    What does this mean?
    • downrightmike 1684 days ago
      19.999999999 billion for the CEO, 1 for employees.
  • rkimmel 1684 days ago
    Makes complete sense.