Son Masayoshi may part with some of a prized 26% stake in Alibaba
crazy” was how a private-equity boss described the $1.7bn golden parachute that SoftBank, a Japanese conglomerate, gave Adam Neumann, co-founder of WeWork, as part of the co-working empire’s bail-out last autumn. SoftBank appears to have come to its senses. On April 2nd it scrapped a deal to buy up to $3bn in WeWork shares, which would have made Mr Neumann a billionaire.
He is under pressure to make concessions. Over the past few years SoftBank took on more debt. Mr Son spent $52bn to buy Sprint, an American telecoms group and Arm Holdings, a British chip-designer . He then set up a $100bn tech-investing vehicle with cash from SoftBank, Saudi and Emirati sovereign-wealth funds, and a few private-sector investors. He splurged $75bn from it on stakes in 88 big tech startups .
As long as Mr Son can pull off the asset sale and cut debt, says Mary Pollock of CreditSights, a research firm, SoftBank’s balance-sheet will emerge stronger. The Alibaba stake is still a get-out-of-jail-free card, she says. For the time being, Mr Son has probably eased fears about his entire empire collapsing under its weight of debt.
“Masa is a visionary who loves big projects, and founders get star-struck by him,” says an investor close to SoftBank. “This needs to be tempered to be sustainable.” Mr Son overrode colleagues who asked about cashflow and profits at portfolio companies. Now things are changing at the Vision Fund, too. The dissenters are taken more seriously and the fund is being harder-headed. Firms are being asked to find other sources of capital. Profit, not just growth, has become more of a priority.
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