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SoftBank’s debt obsession

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71–80 of 85 posts

Re: SoftBank’s debt obsession

#71
post #67

Earlier quoted context omitted.

I've never understood that argument. Can't they just sink more money into the stock market?

Supply and Demand. More demand is better terms for stock sellers, i.e. companies. And their investing would probably completely skew the market. So it's hard. Investing directly might put them at risk of some kind of oversight as well. And they already have a lot tied up in those kinds of investments anyhow. They own a lot of real estate around the world as well. It's hard to find places to park that amount of money…

But there's more than one stock market - there are so many around the world, surely them buying couldn't make that much of an impact?

Re: SoftBank’s debt obsession

#72
post #71

Earlier quoted context omitted.

Supply and Demand. More demand is better terms for stock sellers, i.e. companies. And their investing would probably completely skew the market. So it's hard. Investing directly might put them at risk of some kind of oversight as well. And they already have a lot tied up in those kinds of investments anyhow. They own a lot of real estate around the world as well. It's hard to find places to park that amount of money…

But there's more than one stock market - there are so many around the world, surely them buying couldn't make that much of an impact?

" there are so many around the world"

Not really. Or rather, they are smaller in terms of market cap. Also - you basically have US and EU, the rest are very high risk, and subject to all sorts of shenanigans.

That's how much money the Saudis have.

We need to go clean nuclear, it would solve so many problems ...

Re: SoftBank’s debt obsession

#73
post #64

There has been a lot of talk (and speculation) in the past regarding Softbank being 1. the avenue for Saudi Investment of their (est.) $Trillion++ as the hedge against oil's future and 2. The apac version of HSBC/DeutscheBank laundering schemes. Anyone have any speculation on the veracity of these rumors? Basically, WRT the debt risks that Softbank is taking, it suggests that they don't care about the risks, because…

I'd like to learn more about this and their motives. It'd be a little alarming if the US government was the top investor in the top vc firm buying up massive stakes of top SV companies. But maybe im unaware of how much investments America and other countries make like this.

I don't know if the government does, but plenty of individual states have investment funds or pension funds that do VC work. Apprenda, my old employer, was partially backed by the a New York State pension fund

Re: SoftBank’s debt obsession

#74
post #33
post #7

// Oversimplified napkin math for fun, stop taking this seriously // > Around 60% of the money promised to the Vision Fund by investors other than SoftBank takes the form of debtlike securities that earn a 7% fixed return annually. They get $70B and have to pay 7% fixed annually. S&P rate of return on average is 9.7%. Softbank could pocket 2.7% of $70B ($1.89B a year) by just investing in an index. With $70B you coul…

If you had started such a scheme in 1999 or 2000 you would be bankrupt by now.

Not if you invested in an adapting basket of stocks (ie, an Index like the S&P 500) used dividends (2% to create a cash cushion) and had access to 0-2% short term debt (ie the Fed bank rate) during every downturn.

Re: SoftBank’s debt obsession

#75
post #33

Earlier quoted context omitted.

If you had started such a scheme in 1999 or 2000 you would be bankrupt by now.

Not if you invested in an adapting basket of stocks (ie, an Index like the S&P 500) used dividends (2% to create a cash cushion) and had access to 0-2% short term debt (ie the Fed bank rate) during every downturn.

I was talking about taking $100 (at 01/01/99 or 01/01/00), investing them in the S&P500 (with dividends reinvested), and paying out $7 every Dec 31. You would run out of money eventually.

Of course if you add cheap additional leverage at certain moments and time the market successfully you can do better. But that’s not the original proposal.

Re: SoftBank’s debt obsession

#76
post #67

Earlier quoted context omitted.

To be fair, the Saudis have so much money it's hard to place, and therefore have to accept riskier terms. So maybe this is realistically the best they could do. And so Softbank can get away with better terms.

I've never understood that argument. Can't they just sink more money into the stock market?

Sinking more money in the stock market is the same as getting a worse deal or concession in any fund.

Stocks are already bought up to levels that don't make a meaningful theoretical return if the individual companies started returning capital via dividends.

Bonds are in the same situation, they have been bought up beyond sane levels (theoretical return based on coupon and yield curve) pushing their yield to lower rates than risk and inflation would warrant. Basically, with bonds you have to accept that some issuers will go bankrupt and you get a 100% loss on that portion of the portfolio, therefore the whole portfolio of bonds has to account for that risk and it can't right now, if you keep buying more of them at higher prices

Getting out of the public markets you go into the private equity markets. There are plenty of investments to fund which nobody else is funding due to the way the deal looks or the way the team looks. You go further out on the risk curve, and also accomplish the goal of keeping money flowing in the economy.

This is what the central banks wanted to happen: assets prices and yields of everything passive is so unattractive that people are forced to make their capital more productive in the economy. Sure they didn't expect people to plow into crypto, but risk is risk and yield is yield.

It is more likely that Softbank functions as an economic stimulus backed by the Bank of Japan's economic policy decisions.

Re: SoftBank’s debt obsession

#77
post #28

Plainly and simple: Vision Fund is a giant LBO scheme for Saudi money. Any other interpretation does not make any sense financially. Vision fund is knee deep in SHORT TERM debt – thus, they have to make money fast. They look for stuff they can flip quickly, and "Pets.com style" companies are ideal targets for that.

Giant leveraged buyout scheme for Saudi money? When you use scheme that suggests a pejorative. What do you mean?

Re: SoftBank’s debt obsession

#78
post #28

Plainly and simple: Vision Fund is a giant LBO scheme for Saudi money. Any other interpretation does not make any sense financially. Vision fund is knee deep in SHORT TERM debt – thus, they have to make money fast. They look for stuff they can flip quickly, and "Pets.com style" companies are ideal targets for that.

Giant leveraged buyout scheme for Saudi money? When you use scheme that suggests a pejorative. What do you mean?

Rephrasing that: Vision Fund is a front for Saudi Arabia doing LBO schemes in Western countries.

Re: SoftBank’s debt obsession

#79
post #78

Earlier quoted context omitted.

Giant leveraged buyout scheme for Saudi money? When you use scheme that suggests a pejorative. What do you mean?

Rephrasing that: Vision Fund is a front for Saudi Arabia doing LBO schemes in Western countries.

Saudi Arabia could already do LBOs in Western countries, well you think they can take out more leverage because of the restrictions on debt in Islamic culture?

I would say the Softbank entity shields them in case things go down, like after the things that went down.

Re: SoftBank’s debt obsession

#80
post #78

Earlier quoted context omitted.

Rephrasing that: Vision Fund is a front for Saudi Arabia doing LBO schemes in Western countries.

Saudi Arabia could already do LBOs in Western countries, well you think they can take out more leverage because of the restrictions on debt in Islamic culture? I would say the Softbank entity shields them in case things go down, like after the things that went down.

At least nominally it does provide them a minute degree of risk isolation, and they surely want to have an executor better suited dealing with dotcom hipsters than some Saudi guy with beard and a hoodie.
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