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SoftBank plans to lend $20B to its CEO and employees amid volatile markets

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Re: SoftBank plans to lend $20B to its CEO and employees amid volatile markets

#4

Post by rococode »

Tangentially related: Could someone explain to me why SoftBank often seems to be the only major company playing in the "traditional" VC space? We hear of the "SoftBank round", but not, for example, the "Microsoft round" or the "AT&T round".

Relative to many companies, SoftBank is not so big. And the bigger companies do have VC-style subsidiaries set up (e.g. Microsoft's M12). But SoftBank seems to make the highest profile investments by a significant margin. Is there any particular reason for this? Are they simply more tolerant of risk and therefore write bigger checks?

Re: SoftBank plans to lend $20B to its CEO and employees amid volatile markets

#7

Post by mushufasa »

rococode wrote: post #4

Tangentially related: Could someone explain to me why SoftBank often seems to be the only major company playing in the "traditional" VC space? We hear of the "SoftBank round", but not, for example, the "Microsoft round" or the "AT&T round". Relative to many companies, SoftBank is not so big. And the bigger companies do have VC-style subsidiaries set up (e.g. Microsoft's M12). But SoftBank seems to make the highest pr…

Softbank isn't really a traditional company. And it's not really a bank. It started as a kindof publisher for software ("software bank"), so it has a lot of expertise in identifying and distributing new technologies, and it's essentially acted as a holding company for tech investments (including alibaba) since 2000. Really it's the manifestation of Masayoshi Son, who is an incredible entrepreneur, technologist, and investor.

Apple+ more invest in the Softbank Vision fund, so the "SoftBank round" is already what you are thinking.

Re: SoftBank plans to lend $20B to its CEO and employees amid volatile markets

#8

Post by 5822130027 »

It's important to understand what SoftBank is, and why betting against them is a bad idea.

Globally we are going through a period of deflation.

Japanese Banks have been dealing with this problem for 30 years now.

BOJ can print money ( yen ) and flood the world and the value of the yen would still go up !

The reason is there is a lot of latent demand for Japanese exports.

When Softbank invests in lets say India, ( through Uber drivers ), and suffers losses.

The yens released ends ups creating demand for Japanese export.

From Softbank's perspective it's a win-win, they get to be owners of really important tech companies and at the same time Japanese companies see a demand surge for their products.

It's hard to understand initially - but don't be surprised to see Softbank clones propping up in Europe in 10 years - once the EU has been completely battered by deflation.

In the US you might yet see the largest types of these funds in the future once the US govt. decides it wants some fiscal spending.

Re: SoftBank plans to lend $20B to its CEO and employees amid volatile markets

#9

Post by mushufasa »

nobrains wrote: post #3

Can someone explain the economical incentives behind this and how it helps SoftBank and the employees? I understand what they are doing but I don't understand how it will work to succeed.

5% for a loan is pretty good these days if it's low risk. With yields way down and now negative, it's hard for companies to make use of cash reserves. If SoftBank has cash, and they know that employees are making way above 5% returns on average (cough Vision Fund), then it seems like a good investment.

For example,

0) SoftBank loans extra cash to Masayoshi Son.

1) Masayoshi Son invests a portion in the next Vision fund which makes 40% returns, and the rest in safer strategies (public equities, long-term debt)

2) Masayoshi Son makes a killing, has no trouble repaying the loan.

3) SoftBank just grew their cash reserves well above the market rate.

The key assumption here is 2). But since this is a loan, and Masayoshi Son invested most of the money in safe investments (and has a lot of wealth anyways), even if the Vision fund underperforms, SoftBank can be confident they can still make money back (step 3). They're using their advantages to build their own unique loan product.

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