Masayoshi Son owes SoftBank $4.7bn as side deals go sour

Portfolio losses ratcheted up Japanese billionaire's deficit to about $2.8bn from his Vision Fund 2 interest alone

Investors have raised concerns that Masayoshi Son's mix of personal and company interests are a corporate governance risk. Reuters

Masayoshi Son is now personally on the hook for about $4.7 billion on side deals he set up at SoftBank Group to boost his compensation, after mounting losses in the company’s tech portfolio wiped out the value of his interest in the second Vision Fund.

Over the years, the Japanese billionaire’s controversial personal stakes in SoftBank’s investments drew fire from investors, who pointed to the mix of personal and company interests as a corporate governance concern.

Mr Son, who owns a more than 30 per cent stake in SoftBank, has denied there was a conflict of interest and said it was remuneration for his investment expertise, in lieu of investment fees.

The move has backfired, enveloping Mr Son’s personal finances in the downside of the world’s biggest tech investor’s bets. He was down more than $4 billion on his side deals through to the June quarter, Bloomberg reported earlier.

Mr Son last week said he was stepping away from leading earnings calls, to focus on preparing chip designer Arm for a public listing — an event that would give SoftBank fuel to again pursue new investments. SoftBank will bide its time in a tech winter and pay down its debt, he and his lieutenants said.

SoftBank’s Vision Fund arm posted a $7.2 billion quarterly loss last week, driven by the declining value of portfolio companies such as SenseTime, DoorDash and GoTo. The company has been selling assets to raise cash and shore up its balance sheet, posting gains from selling a chunk of its stake in Alibaba.

“We need to go full-on defence,” SoftBank chief financial officer Yoshimitsu Goto said. “SoftBank is pessimistic on the outlook. We do not yet see the light.”

The 65-year-old Mr Son holds 17.25 per cent of a vehicle set up under SoftBank’s Vision Fund 2 for its unlisted holdings, as well as 17.25 per cent of a unit within its Latin America fund, which also invests in start-ups. He has a 33 per cent stake in SB Northstar, a vehicle set up at the company to trade stocks and derivatives.

Portfolio losses ratcheted up Mr Son’s deficit to about $2.8 billion from his Vision Fund 2 interest, and $252 million at the Latam fund, according to disclosures for the September quarter. His remaining deficit at SB Northstar was 233.6 billion yen ($1.6 billion).

Chief executive of SoftBank Masayoshi Son is preparing Arm for listing. Reuters

The amount Mr Son owes SoftBank from his interests in Vision Fund 2 and the Latam fund rose about $750 million in the last quarter.

Mr Son’s interests in Vision Fund 2 and the Latam fund were structured so the billionaire didn’t pay cash up front for his 17.25 per cent stakes. He is obligated to pay 3 per cent on the “unpaid equity acquisition amount” until repayment, interest that has been wrapped into his liabilities.

There is no deadline for repayment and the value of Mr Son’s positions could improve in the future, and for SB Northstar, Mr Son has already deposited some cash and other assets. The founder would pay his share of any “unfunded repayment obligations” at the end of the fund’s life, which runs for 12 years with a two-year extension.

Mr Son has deposited 8.9 million of his own shares as collateral for Vision Fund 2, and another 2.2 million shares as collateral for the Latam fund, the company said in its disclosures. The stock will be released only once the receivables are settled.

Mr Son’s net worth stood at $12.7 billion after Thursday’s close of trading, after adjusting for his deficit from his interests in Vision Fund 2 and Latam fund, according to Bloomberg Billionaires Index.