The SoftBank Ecosystem
Softbank Group Corp, one of Japan’s largest conglomerates, was established almost 40 years ago in 1981. Starting out as a software distributor, the company slowly ventured into publishing, followed by mobile communication, broadband, e-commerce, and software. The holding company currently has large investments in Yahoo Japan, Alibaba, Sprint, BrightStar, and Softbank Corp among others. The group also manages VisionFund, which is the world’s largest technology focused venture capital fund. After Toyota, SoftBank is Japan’s largest publicly traded company.
The holding company’s vision is to “contribute to people’s happiness through the Information Revolution”, and to become “the corporate group needed most by people around the world.” This vision closely ties in with the company’s actions to advance the Information Revolution through leading technology and superior business models.
According to the Group’s Chairman, Masayoshi Son, he has invented a strategy for the group to grow continuously for the next 300 years. This is the Cluster No. 1 Strategy, which entails building a holding company that owns majority shareholdings in leading companies in their fields, with ownership of 20-30%. The two primary features (investing in leading companies, and holding 20-30% shares) of this strategy are key to its success. This helps ensure that the companies part of the portfolio are truly contributing to the groups overall success, while non-performers are slowly divested away. Recent focus has been towards the venture capital fund, worth USD 10 billion, which has already dealt with one-tenth of worldwide VC volume in 2019.
Another part of SoftBank Group’s investment ecosystem, is that they do not heavily control the companies in the group. A key example is the investment in Alibaba, where no changes to the brand name were made despite a majority shareholding. Known to support and encourage startups, Softbank has invested in a number of firms in the tech space, including Uber, WeWork, PayPay, and DoorDash.
Recent events however, may have forced Son to rethink his strategy. With WeWork’s failed IPO and the ousting of its co-founder Adam Neuman, Softbank has a new message for startups – “Your dreams better be profitable”. SoftBank Group may need to write down its investment in the venture, which is said to be worth only USD 15 billion (compared to USD 47 billion when SoftBank Group invested). In order to save some of its value, the company is believed to be bringing in Marcelo Claure, executive chairman of Sprint, to turn the business around.
Among other recent events, the Japanese hotel operator Unizo holdings recently withdrew its support for a USD 1.3 billion take-over bid by a SoftBank backed fund, after previously welcoming the same terms. It seems Softbank will need to raise its price, with the current market value being JPY 500 per share above the current offer.
Despite the recent turn of events with WeWork and Unizo, investor confidence in the firm is still high. SoftBank Group raised JPY 400 billion worth of bonds in less than 3 minutes last month – or 146 seconds to be precise. Investors raced to purchase these 7 year notes priced at 1.38%. Another JPY 500 billion was raised 5 months ago in April. While Son has an apparently sound business strategy in place, it is yet to be seen how long investor support remains.