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Once fired up, Masayoshi Son’s investing enthusiasm knows few bounds. SoftBank, the investment vehicle he runs, faces greater constraints. The Japanese giant’s shares have nearly halved in four months as questions have grown over the scale of its involvement with OpenAI. Last time its shares seriously slid, in 2021, they presaged a wider bear market, which kicked in eight months later. Could they be doing the same again?
SoftBank’s shares closed down 9.8 per cent on Monday, losing more than twice as much as the broader Japanese market after reports that OpenAI and Oracle had ditched plans to expand a jointly backed Texas data centre project under the Stargate banner that involves Son’s company. Last month, SoftBank agreed a $30bn investment in the ChatGPT maker’s $110bn latest funding round, boosting its total input to $64.6bn for a 13 per cent stake.
That leaves more than half of its $320bn portfolio in unlisted, illiquid assets, according to S&P. The rating agency this month slapped a negative outlook on its already-junk rating for the Japanese group, citing concerns about liquidity and the weak credit quality of OpenAI.
All this is particularly unhelpful when SoftBank is seeking bridge loans to cover that investment until it can generate funds from selling some of its other holdings. It has liquid assets including $80bn worth of chip designer Arm and sold its Nvidia stake last year to fund an earlier OpenAI investment. It also pushed ahead last week with a $1bn float in New York of PayPay, its Japanese digital payments platform, despite Middle East turmoil.
Big picture, the Japanese group’s existence is a series of excitement cycles. Son gets enthused, investments get bigger and leverage rises until shareholders or lenders — usually both, to some degree — push back. He has been ahead of the curve at times, making an early bet on China’s Alibaba as well as supersizing the notion of the venture capital fund with 2017’s $100bn Vision Fund. There have been less successful bets: the Vision Fund has had ups and downs; WeWork is one Son would doubtless rather forget.
Other companies connected to OpenAI have also fared poorly, with Oracle and CoreWeave also down more than two-fifths each since SoftBank’s late October peak. SoftBank though has a broad array of holdings beyond the company that creates ChatGPT. More than $9bn was spent recently on robotics and a digital infrastructure investor.
Lots of funds hold illiquid stakes. Retail broker Robinhood launched its first last Friday. But SoftBank’s size, notoriety and willingness to use debt make it an unusually liquid means of gaining exposure to Big Tech themes. That may also make it the first to get cut when confidence in Son’s megatrends wavers. Right now SoftBank is one of the most direct ways for regular investors to make a leveraged bet on OpenAI — in either direction.
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