SoftBank increases commitment to second Vision Fund

Fund 1 closed at $98.6 billion in 2018, with SoftBank contributing one-third of the corpus. Twelve months ago, performance had failed to meet expectations. As of March 2020, $81.3 billion had been deployed, $10.8 billion had been realized, and the remaining portfolio was valued at $71.1 billion.

Gross unrealized losses were $4.2 billion, following write-downs of $17.3 billion on investments that year. WeWork contributed $3.3 billion to Fund 1’s losses.

This impacted the launch of Fund 2. In 2019, SoftBank announced it had $108 billion in commitments, but then marketing was put on hold. SoftBank started using its own capital for Fund 2 deals and has increased the balance sheet allocation twice. Masayoshi Son, the firm’s founder, said he is not opposed to taking third-party money, “but we don’t have to beg for participation.”

“In the future, we may consider inviting third-party money, but we don't know yet. At this moment, we just like to continue what we are doing right now,” Son said on an earnings call, noting that SoftBank had backed 60 companies in the first three months of 2021.

Having posted a net loss of JPY961.6 billion last year, SoftBank recorded a net profit of JPY4.99 trillion for the 12 months ended March 2021. This turnaround was largely driven by a JPY6.4 trillion investment gain across all programs and funds, with over half of that coming in the final quarter.

Capital committed from Fund 1 stood at $85.7 billion, $19.8 billion had been realized, and the remaining portfolio was valued at $123 billion, according to a presentation. The cumulative investment gain – realized plus unrealized – was $57.1 billion. Meanwhile, SoftBank had deployed $6.2 billion from Fund 2 and generated an unrealized gain of $5 billion.

The Vision Funds have benefited from a surge in tech valuations in the wake of COVID-19 as well as increased IPO activity. Eleven out of 81 active Fund 1 companies were listed as of March – up from seven a year earlier – and three out of 44 in Fund 2. Not only have Fund 1 realizations increased, but the valuation of the listed portfolio has risen from $13 billion to $54 billion.

The biggest contributor in US dollar terms is Korean e-commerce platform Coupang. SoftBank invested $3 billion between 2015 and 2018 – although a separate presentation puts the Fund 1 investment cost at $2.7 billion – for an approximately one-third stake, helping the company power through an uncertain, high cash-burn phase and come out the other side.

Coupang listed in the US in March and had a market capitalization of $66.8 billion as of early May. Fund 1 was sitting on an unrealized gain of $19.4 billion, or an 8.1x return. Coupang makes up almost half of the listed portion of the portfolio, well ahead of Uber in second place.

Chinese real estate services platform Ke Holdings, which listed in the US in August 2020 and now has a market capitalization of around $56 billion, accounts for nearly all the Fund 2 valuation mark-up. SoftBank invested $1.35 billion and is looking at a 4.4x unrealized return.

Of the external capital in Fund 1, $40 billion was preferred equity with a 7% fixed distribution. The IRR for equity investors is 30%, while the blended return is 22%. Fund 2 had an IRR of 119%.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Fundraising
• Performance
• Technology
• Japan
• Softbank
• TMT