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TOKYO – SoftBank Group has urged some of its leading portfolio companies to step up their listing plans, telling them they should capitalize on the strong investor appetite for the burgeoning tech sector.
Japanese tech investment group led by chairman and chief executive Masayoshi Son hopes many companies in its nearly $ 100 billion Vision fund will benefit from bullish sentiment for tech companies after the coronavirus pandemic, sources close to of SoftBank’s strategy.
“They are transparent enough in their agenda that they would like everyone to list,” said an executive of a company supported by the Vision Fund. The person described the argument as very logical: “This is a unique opportunity and you should take it.”
Some of the Vision Fund’s main bets, including ByteDance and Didi Chuxing in China, Grab in Southeast Asia and Coupang in South Korea, are still private. Making them public at a higher valuation than when the fund made its investment would allow SoftBank to record gains on paper that could be cashed in by selling stocks.
SoftBank’s investment performance has been on a roller coaster ride since Son announced the Vision Fund in 2016. Building a track record of profitable exits would bolster the Japanese group’s appeal as a way to tap into technology companies that will have more value in the future.
Still, SoftBank’s aggressive asset divestment in recent months also indicates that Son is gearing up for a possible market downturn.
The strong appetite for newly listed tech companies has raised hopes that SoftBank – which reports its third quarter results on Monday – could benefit generously from its investment portfolio.
SoftBank Group’s share price hit a 21-year high on Friday after Auto1 Group, a German online car dealership backed by the Vision Fund, soared when it debuted on the stock exchange the day before.
The Vision Fund invested in Auto1 about three years ago at a valuation of 2.9 billion euros ($ 3.48 billion at current rates). The company ended its first day of trading with a market capitalization of 10.4 billion euros.
Shares of Kuaishou, a Chinese video streaming app, also surged during the company’s Hong Kong debut on Friday, raising expectations of a rise in the valuation of bigger rival ByteDance.
SoftBank started building a War Vault last March. The agreements to sell its interests in Alibaba Group Holding, T-Mobile and the telecommunications unit SoftBank Corp. have generated over $ 50 billion in cash.
The Vision Fund also sold $ 2 billion in shares in Uber Technologies, as well as shares in messaging software provider Slack Technologies and biotech firm 10X Genomics. In September, SoftBank announced plans to sell UK chip designer Arm to Nvidia in a $ 40 billion deal, although it is awaiting regulatory approval.
The money raised through these transactions far exceeds SoftBank’s initial target of $ 41 billion, and some observers believe the company is storing cash to hedge against a recession.
Son previously lamented that when SoftBank’s investments plunged in value after the dot-com bubble burst in 2000, he didn’t have enough money to buy future tech giants like Amazon.
“We’re seeing ridiculous valuations right now, not because SoftBank did a good job, but simply because the market is hungry for all the money from the IPO,” one analyst said. “The bigger question is how long this can last and if SoftBank is able to get out in certain places.”
A spokesperson for the Vision Fund denied that SoftBank was urging companies to go public.
Rajeev Misra, CEO of The Vision Fund, said recently that the fund was about “long-term patient capital”, but recognized the potential for better outflows from investments.
“From our point of view, or from the point of view of investors, rising public market valuations of course give better exits,” Misra said at a conference hosted by Goldman Sachs. “[From] from the point of view of entrepreneurs, this gives them an alternative to raise capital at a much cheaper cost. “
SoftBank is not alone in the race for corporate IPOs. More than 200 specific-purpose acquisition companies – publicly traded shell companies with the aim of merging with private companies – were created in 2020.
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