最有看点的互联网金融门户

最有看点的互联网金融门户
互联网经济国际资讯基于互联网平台的金融业务投融资

软银2018年终盘点:负债累累、强悍生长

互联网经济国际资讯基于互联网平台的金融业务投融资

软银2018年终盘点:负债累累、强悍生长

如果要在2018年创业和科技新闻报道中选一个高频词,那毫无疑问就是软银(SoftBank)。仅仅在2018年一年,这家日本电信集团旗下的愿景基金向各个领域的创业公司投入了巨额资金,确切地说,是数十亿美元。被愿景基金看重的创业公司领域广泛,从分子制造商(Zymergen)到机器人披萨配送业务(Zume pizza),各个科技领域都有涉及。

对于软银愿景来说,2018年起起伏伏、有高有低。所谓高潮,无疑是对Flipkart的支持获得了数十亿美元的回报;而令人难以置信的低点,在于沙特阿拉伯虐杀Jamal Khashoggi所引发的重大危机。毕竟地球人都知道,沙特阿拉伯是愿景基金的最大投资者。

当然了,愿景基金只是软银2018年难忘故事中的小小一部分。本周三,软银集团旗下的移动业务部门在东京证券交易所宣布上市(股票代码:9434),这是全球有史以来仅次于阿里巴巴的第二大IPO,融资金额达236亿美元。然而令人悲伤的是,尽管软银花费了很大精力向散户推荐该股,但股民们还是在上市首日选择抛售,导致开盘价1463日元跌至收盘价1282日元,跌幅高达15%。这也是日本近十年以来,表现第二差的IPO。

任何雄心勃勃的攻城略地都会有起起伏伏,对于软银集团创始人兼董事长孙正义来说,没有什么能阻挡他,即使是成堆的债务也无法让他停下向前的脚步。

本文以下内容将围绕软银集团的移动电信业务、愿景基金以及其他主要投资行动(Sprint、Nvidia、Arm和阿里巴巴来切入,为读者详细盘点软银集团的2018精彩故事。

软银:移动电信

1.终究是上了市,但2019并不好走

软银集团的核心本质是一家移动电信公司,也是日本的第三大运营商。孙正义多年来一直希望将软银从一家成熟的电信运营商转变为一家领先的投资公司,为下一代科技公司提供资金支持。然而一个关键的问题是,软银背负巨额债务。相对于融资金额来说,软银最大的数字是在该公司的资产负债表上。2018年9月底的统计数字称,软银持有约18万亿日元,约合1.58万亿元人民币的流动和非流动有息债务。这个数字是该公司营业收入的6倍多,略低于巴基斯坦整个国家所持有的公共债务总和。

尽管软银极高的债务额往往是该公司媒体报道的次要焦点,但软银的高管们对这一数字心知肚明,并且很满意。当讨论到公司的财务战略时,软银首席财务官Yoshimitsu Goto表示,目前该公司正处在从电信控股公司过渡到一个投资企业的早期阶段,这种过渡带来的后果就是“有可能被认为是一个背负重大债务和利息负担的企业集团”,甚至被人群嘲“债台高筑”。

当然了,高额的债务负担使得企业的操作相当复杂。因此,软银决定将其旗下移动电信部门进行IPO,作为获得新资本注入的一种方式,继续转型为一家投资公司。不难发现,通过本周筹集的236亿美元,软银做到了这一点。然而软银上市首日股价下跌15%的事实也表明,市场尚未完全接受孙正义对软银未来发展方向的看法。这一下跌将使围绕债务的企业财务计算变得更加困难,并将成为软银在2019年的一个重要主题。

2.日本政府希望加强电信领域的竞争,软银压力山大

日本的电信市场极度缺乏竞争活力,少数电信寡头垄断了整个市场,移动服务的收费价格在全球也是名列前茅。日本政府也不会拍卖频谱,这为电信公司节省了数十亿美元的现金成本,帮助它们稳坐盈利巨头的位置。日本首相安倍晋三的政策正在打破电信巨头们所处的这个安逸世界,他把营造该行业激烈竞争作为一项重大的政策举措。具体的措施包括将5G频谱作为竞争激烈的拍卖品、要求电信公司降低价格,并向Rakuten等新玩家开放市场等等。

安倍举措带来的结果是,导致像NTT DoCoMo这样的老牌运营商宣布将移动服务利率下调40%,同时警告投资者们,该公司可能需要五年时间才能恢复目前的盈利能力。这一消息瞬间反应在股票市场上,仅在消息公布后的几天里损失了340亿美元。

正是在软银最需要现金流来偿还债务之际,仿佛整个世界都商量好了似的一股脑地与它作对。该公司坚持认为,在未来仍然可以保持收入和利润的稳定,甚至可以在竞争中成长,但来自主要竞争对手的败北似乎给它的说法泼了一盆冷水。从数据上看,软银上一季度利润大幅增长,但主要来自其愿景基金的投资成果,而非其核心电信业务。

3.Rakuten入场,三足鼎立即将崩塌

对于软银来说,更大的打击来自电商巨头Rakuten。Rakuten宣布,最早将于明年在日本推出一项新的移动服务。虽然自2007年eAccess进入日本电信市场以来,没有一家新公司获准进入该市场,但Rakuten已经获得了2019年日本地区移动电信服务运营的许可权。为了扶持Rakuten,日本政府还制定了一些新的规定,这些规定会使Rakuten更具竞争力,比如禁止电信公司限制设备的可移植性。Rakuten与主要公用事业和基础设施企业的紧密合作关系,也将使其迅速构建自己的网络,其中包括与日本第二大移动服务提供商KDDI的合作。

作为仅次于Amazon的日本第二大电子商务公司,Rakuten拥有明显的内在优势,这将给包括软银(SoftBank)在内的其它老牌电子商务公司带来压力,迫使它们要么满足自身的价格,要么参与到更激烈的竞争之中,从对手的手中获得更多的客户。这一新闻让我们再次看到,在软银资产负债表非常脆弱的时期,他的电信业务前景同样异常艰难。

软银:愿景基金

4.2018年愿景基金规模增大

2018年,愿景基金的规模变得更大了一点。早在2017年5月,愿景基金首次宣布收盘时,它所设定的目标示最终基金规模为930亿美元。然而在2018年,远景基金又获得了50亿美元的资金注入。如果再加上软银旗下的Delta基金已经获得的60亿美元,孙正义现在可以支配的资金就超过了1000亿美元。Delta基金是一个独立的工具,用于缓解围绕滴滴投资的竞争冲突。

但是,这些并不是软银投资资本的全部!有传言称,愿景基金还将通过举债筹集40亿美元,以便更快地为初创公司提供资金。尽管该公司有来自包括沙特阿拉伯、阿布扎比和苹果在内的很多支持者,但他们为愿景基金提供资金的速度并不能跟得上愿景对于投资初创公司的迫切渴望。这样一来,至少我们可以说软银的债务结构非常的复杂。

孙正义多次表示,他希望筹集3000亿美元的第二愿景基金。这一愿望最早可能在明年实现,最终在未来几年内达到8800亿美元的资金规模。然而,软银庞大的债务危机和与沙特阿拉伯之间的争议关系,将在2019年成为孙正义这一愿景的主要拦路虎。

5.讲真,还有谁不是软银的“债主”呢?

整个2018年,软银都占据了各大媒体的头条,它在不同地区和行业的巨额投资稳步增长。根据监管备案文件、Pitchbook和Crunchbase的数据,软银及其愿景基金领投了大约35轮融资,投资金额总计约为300亿美元,如果算上对Uber和Grab的投资,总计超过400亿美元。这两笔投资开始于2017年,但到了2018年初才结束。

令人惊讶的是,软银最新提交的文件显示,截至9月底,愿景基金仅配置了330亿美元,约占总基金的三分之一,尽管实际配置的资金可能要大得多。除此之外,软银还定期在集团层面进行投资,打算日后将股份出售或转让给愿景基金。因此,软银目前持有约277亿美元的愿景基金以外的投资,包括该公司在优步(Uber)、Grab和Ola的股份,预计这些股份最终将转移至愿景基金,等待LP和监管部门的批准。

6.愿景基金收获巨额回报,未来可期

刚开张第一年,愿景基金就已经开始看到投资成果,有几家投资组合的创企已经成功上市。其中以印度电子商务初创公司Flipkart的回报最为惊人,软银在Flipkart的25亿美元投资仅用了一年时间,就实现了15亿美元的收益。Flipkart可能是该基金今年最大的亮点,但它仅仅只是该基金无限发展潜力中的一小部分,平安健康科技股份有限公司(简称平安健康)也在香港证券交易所完成了IPO。

这些早期的胜利是积极的信号,但愿景基金的重头戏将在明年初上演,届时优步(Uber)、Slack和滴滴(Didi)等公司将会逐一上市。如果投资回报被证明是有利可图的,那么第二愿景基金的资金筹集可能很快就会到位。但是如果市场情况出现遇冷,独角兽们的上市出现严重问题的话,愿景基金的未来仍然如履薄冰。

7.虐杀使软银步履维艰

沙特阿拉伯公开杀害持不同政见的记者Jamal Khashoggi,这一骇人听闻的事件震惊了科技界。这给软银及其愿景基金带来了巨大压力,毕竟沙特阿拉伯的公共投资基金(PIF)是软银最大的LP,承诺投资450亿美元。科技界有很多人强烈呼吁孙正义拒绝来自沙特阿拉伯未来的资金注入,但这种站边对于孙正义来说很困难,原因很简单:这个世界上能够向支持高风险技术投资的公司注资数百亿美元的金主并不多,而且这个金主还要愿意主动忽视软银的巨额债务和生存风险。

所以软银面临着一个艰难的选择。它能够拥有资金,但需要从令人讨厌的人那里获得资金。当然了,这也许没什么问题,毕竟沙特阿拉伯也是硅谷最大的投资者。或者,软银可以选择放弃,努力找到另一家LP公司,以取代沙特庞大的资金承诺。如果2019年软银愿景基金投资创企的IPO表现亮眼的话,孙正义很有可能在沙特之外找到更多的合伙人、筹得更多的资金,但如果事情朝另一个方向发展的话,愿景基金的下一次筹资应该还是以沙特阿拉伯为主角,或者根本不会进行募资。

软银:其他事件

8.在与T-Mobile合并之后,软银Sprint终于迎来了好消息

自从软银在2013年以200亿美元收购Sprint以来,Sprint的巨额债务导致其表现黯淡,软银的信用评级也被下调至垃圾级。可以说软银为了Sprint也是操碎了心,在2017年最初的谈判陷入停滞后,软银于2018年重新启动了与德国电信的合并谈判,最终达成了Sprint/T-Mobile的合并协议,软银在Sprint/T-Mobile的持股比例将从略超80%降至合并后综合体的27%。

尽管电信交易的批准记录不佳,而且美国监管机构对跨境并购的审查也越来越严格,但软银提出的合并计划最近还是获得了美国外国投资委员会(CFIUS)、司法部、国土安全部和国防部的批准。值得一提的是,作为协议的一部分,软银同意将华为的设备从基础设施中移除。尽管该协议仍需获得美国联邦通信委员会(Federal Communications Commission)的批准,但未来的道路似乎相对好走了。如果交易最终得以完成,软银将不再需要用自己的资金整合Sprint的财务数据,从而改善软银的资产负债,至少从表面上看是这样的。软银的资产负债表

9.软银对英伟达的赌注可能会迎来30亿美元的收益

软银在收购了英伟达(Nvidia)约40亿美元的股份后,于2017年成为该公司第四大股东。然而在过去两个月,英伟达的股价直线下跌,原因是该公司面临地缘政治动荡、加密技术崩溃导致的巨额收入流失,以及下一代应用程序工作流领域的竞争日益激烈。

见此情景,软银希望出售其持有的英伟达股份,以获得大约30亿美元的利润。正如彭博社(Bloomberg)报道的那样,这是因为此次收购是以一种“领圈交易”的形式进行的,这种交易保护软银不受英伟达股价下跌的影响。这一策略是一步非常好的棋,提醒了人们即使股价跌去一半,也完全有可能继续赚钱。

不过可以肯定的是,软银仍然对下一代人工智能芯片抱有极大的热情和希冀,只不过目前它需要找另一班便车而已。

10.ARM或将成为软银的筹码

2016年,软银以320亿美元收购了芯片系统设计公司ARM Holdings,这是软银有史以来最大的一笔收购。ARM的设计在智能手机中占主导地位,而2016年智能手机在全球范围内迅速普及和增长。虽说现下形式微转,ARM不得不在2018年调整战略,以适应不断变化的市场动态,但ARM给软银带来的好消息一直都没有停止。由于下一代iPhone销量停滞不前,有传言称苹果将在更多的产品系列中使用ARM芯片,包括Mac系列。除此之外,ARM目前正在为诸多数据中心设计芯片,并开始涉足人工智能和汽车领域。ARM首席执行官表示,到了2022年ARM的营收将翻倍,如果能实现这一目标,ARM的增长势头将会不断持续、活力涌现。

当然了,ARM也并不是一帆风顺。过去两年间,半导体领域的行业整合持续不断,这种整合收购使得幸存下来的公司在与ARM的竞争中变得更加强势。一些有前途的初创公司或将阻碍ARM的增长,这也是英伟达(Nvidia)等其他老牌公司共同面临的风险。尽管如此,ARM目前的战略地位比英伟达要好得多,因为ARM成功地维持了自己的行业领导角色,这对于软银来说无疑是个好消息。

11.阿里巴巴为软银的负债带来了新的压力

虽然软银在早些时候凭借对阿里巴巴的大力支持而大赚一笔后,一直在缓慢变现,但该公司对阿里巴巴的持股比例仍占29%。软银与阿里巴巴的关系使得该公司不断增强了对杠杆的需求和兴趣。软银将其在阿里巴巴的股份作为抵押,获得了80亿美元的非资产负债表贷款,从而成功地避免了软银的信用评级的进一步下降。但在更严峻的宏观环境和销售增长放缓的影响下,阿里巴巴在2018年累计下跌近20%,过去6个月累计下跌30%。这意味着软银已经捉襟见肘的资产负债表又将出现数百亿美元的亏损,而且就像上述许多故事一样,这将使软银在2019年的融资前景面临挑战。

至此,我们又回到了软银2018年的核心主题:债务、杠杆和金融魔法,以实现向技术投资公司的大胆转型。这种转变当然并不顺利,但它还是在一点一点地向前推进。如果软银能够驾驭日本电信市场的变化,同时愿景基金的一些重大投资项目成功完成上市,再管理好对Sprint和阿里巴巴的巨额投资,软银还是有潜力实现自己的目标的,尽管这一过程曲折绵长。

If there was a word that dominated startup and tech news coverage this year, it was SoftBank. The Japanese telecom conglomerate’s Vision Fund pushed out a prodigious amount of capital this year — quite literally billions of dollars — into companies as diverse as a molecular manufacturer (Zymergen) and a robotic pizza delivery business (Zume Pizza). It was a year of highs as its Flipkart transaction produced billions in returns, as well as a year of incredible lows, what with the crisis over Saudi Arabia’s murder of Jamal Khashoggi. Saudi Arabia is the largest investor in the Vision Fund.

But the Vision Fund is only part of the SoftBank story this year. The company’s mobile unit started trading today on the Tokyo Stock Exchange (ticker: 9434), the second largest IPO of all time after Alibaba, raising $23.6 billion. But after weeks of pushing the stock to Japanese retail stock investors, those same consumers dumped the stock upon its debut, dropping by 15% from its debut at ¥1,463 to its close at ¥1,282. That’s the second worst IPO performance this decade for a Japanese company.

Highs and lows come with any ambitious project, and certainly for Masayoshi Son,  the founder and chairman of SoftBank Group, nothing — not even piles of debt — will stand in his way.

Today, Arman and I wanted to look back at SoftBank’s year, and so we’ve compiled ten areas for analysis around the group’s telco business, its Vision Fund, and its other major investments (Sprint,  Nvidia, Arm, and Alibaba).

SoftBank: The Telecom

1. Its IPO did what it had to do (raising money), but bad early performance will be a challenge for 2019

At its core, SoftBank Group is fundamentally a telecom, and the third-largest player in the Japanese market. Masayoshi Son has for years wanted to transform SoftBank from a mature telco player into a leading investment house for funding the next-generation of technology companies.

There’s just one problem: SoftBank is sitting on piles of debt. As Arman and I wrote about a few weeks ago:

The bigger number though is sitting on the liabilities side of the company’s balance sheet. As of the end of September, SoftBank had around 18 trillion yen, or about $158.8 billion of current and non-current interest-bearing debt. That’s more than six times the amount the company earns on an operating basis, and just slightly less than the public debt held by Pakistan.

And though SoftBank’s sky-high debt balance tends to be a secondary focus in the company’s media coverage, it’s a figure that SoftBank’s top brass is well aware of, and quite comfortable with. When discussing the company’s financial strategy, Softbank CFO Yoshimitsu Goto stated that the company is in the early stages of a transition from a telco holding company to an investment company, and as a result is “likely to be perceived as a corporate group with significant debt and interest payment burden” with what is “generally considered a high level of debt.”

Those debt loads have made corporate maneuvering quite complicated. And so the company decided to put its mobile telco unit up for public trading as a means of getting a fresh injection of capital and continue its transformation into an investment shop. By raising $23.6 billion today, the company did just that.

The 15% drop in value on its debut though shows that the market has yet to fully buy into Son’s vision for where SoftBank is heading. That lowered price will make the corporate financial math around debt tougher, and will be a key theme for 2019.

2. The Japanese government wants to increase competition in the telco space, putting massive pressure on SoftBank’s financials

Japan’s telco market is quite dormant, with mature, oligopolistic companies charging some of the highest prices on the planet for mobile service. Japan’s government also doesn’t auction off spectrum, which has saved telcos billions of dollars in direct cash costs, helping them to become reliable profit-generating juggernauts.

That cozy world is being shattered by the policy of Japanese prime minister Shinzo Abe, who has made increasing competition in the industry a major policy initiative. That includes putting 5G spectrum up for what will essentially be a competitive auction, demanding lower prices from telcos, and opening the market to new entrants like Rakuten (see #3 below).

As a result, incumbents like NTT DoCoMo have announced rate cuts of up to 40 percent on mobile services, while warning investors that it may take five years for the company to return to current profitability. Those announcements caused stock traders to dump Japanese telco shares this year, shedding $34 billion in the days following the announcements.

At a time when SoftBank most needs its cash flow to pay off its debt, the world is rapidly moving against it. The company has insisted that it can keep revenues and profits stable and even grow into the competition, but the announcements from its larger competitors dump cold water on its claims. SoftBank’s profits surged in its last quarter, but mostly from its Vision Fund investments rather than its core telco business.

3. Rakuten’s entrance into the Japanese mobile service market will scramble the traditional three-way oligopoly

One of the big news stories for SoftBank came from ecommerce giant Rakuten, which announced that it will launch a new mobile service in Japan starting as early as next year. As Arman and I wrote about at the time:

Though a new entrant hasn’t been approved to enter the telco market since eAccess in 2007, Rakuten has already gotten the thumbs up to start operations in 2019. The government also instituted regulations that would make the new kid in town more competitive, such as banning telcos from limiting device portability.

Rakuten’s partnerships with key utilities and infrastructure players will also allow it to build out its network quickly, including one with Japan’s second largest mobile service provider, KDDI.

Rakuten has obvious built-in advantages as the second largest ecommerce company in Japan following Amazon, and that will put pressure on other incumbents — including SoftBank — to meet its prices or to compete with more marketing dollars to reach customers. Again, we see a tough road ahead for SoftBank’s telecom business at a very vulnerable time for its balance sheet.

SoftBank: The Vision Fund

4. The Vision Fund actually got bigger this year

The Vision Fund’s massive vision got just a bit bigger this year. When the fund announced its first close in May 2017, it set a target final fund size of $93 billion. In 2018 though, the Vision Fund received another $5 billion in commitments. When we add the $6 billion already committed for SoftBank’s Delta Fund, which is a separate vehicle used to alleviate conflicts around the company’s Didi investment, Masayoshi Son now has more than a $100 billion at his disposal.

But that’s not all! The Vision Fund has also been rumored to be raising $4 billion in debt so that it can fund startups faster (picking up on that debt theme yet?). Its LPs, which include Saudi Arabia, Abu Dhabi, and Apple, are given time to fund their commitments to the Vision Fund, and so the fund wants to have cash in the bank so that it can fund its investments faster. Debt structures in the fund are complicated, to say the least.

Masayoshi Son has repeatedly said that he wants to raise a $300 billion Vision Fund II, possibly as soon as next year, eventually ramping to $880 billion in the coming years. Whether the company’s debt load and controversy over Saudi Arabia (see #6 below) will allow that vision to come to pass is going to be a major question for 2019.

5. Seriously: is there any company not getting a multi-hundred million dollar term sheet from SoftBank these days?

SoftBank dominated headlines throughout 2018 with a steady cadence of monster investments across geographies and industries. Based on data from regulatory filings, Pitchbook, and Crunchbase, SoftBank and its Vision Fund led roughly 35 investment rounds, with total round sizes aggregating to roughly $30 billion, or over $40 billion when including investments in Uber  and Grab, which were announced in 2017 but didn’t close until early 2018.

Surprisingly, SoftBank’s latest filings indicate that as of the end of September, the Vision Fund had only deployed roughly $33 billion, or about one-third the total fund, though the actual number might be quite a bit larger. SoftBank has led twelve rounds since September, including buying a $3 billion dollar warrant for WeWork and finalizing a large round that included secondary shares into Chinese news aggregator ByteDance.

In addition to investing directly through its Vision Fund, SoftBank also regularly makes and holds investments at the group level, with the intention of selling or transferring shares to the Vision Fund at a later date. As a result, SoftBank currently holds around $27.7 billion in investments that sit outside the Vision Fund, including the company’s stakes in Uber, Grab and Ola which it expects to eventually transfer to the Vision Fund pending LP and regulatory approvals. Assuming it plans to move the majority of these investments to the Vision Fund, SoftBank might have already deployed close to half the fund.

For all of that money flowing out the door though, there are limits even to the Vision Fund’s ambitions. Just today, the Wall Street Journal reported that LPs are pushing back against a plan to buy out a majority of WeWork, which would push the Vision Fund’s investment in the co-working startup to $24 billion. From the article:

Some of the people said that [Saudi Arabia’s] PIF and [Abu Dhabi’s] Mubadala have questioned the wisdom of doubling down on WeWork, and have cast doubt on its rich valuation. The company is on track to lose around $2 billion this year, and the funds have expressed concern that WeWork’s model could leave it exposed if the economy turns, some of the people said.

If the investment went through, WeWork would represent roughly a quarter of the fund’s capital, an astonishing level of concentration for a venture fund. Its a bold, concentrated bet, exactly the kind of model that entices Son.

6. The Vision Fund generated its first massive returns with Flipkart, Guardant and Ping An, with a huge roster to come

In just the first full year of operations, the Vision Fund has already begun to see the fruits of its investments with several portfolio company exits.

It made a spectacular return on Indian ecommerce startup Flipkart,  where SoftBank realized a $1.5 billion gain on its $2.5 billion investment in just about a year. Walmart, which bought a 77% stake in Flipkart as part of its ambitious overseas strategy, valued the company at $21 billion.

Flipkart may have been the year’s largest highlight for the Vision Fund, but it wasn’t the only liquidity the fund saw. Its pre-IPO investment in Ping An Health & Technology Co, which produces the popular Chinese medical app Good Doctor, debuted on the Hong Kong Stock Exchange, and Guardant Health, which makes blood tests for disease detection, went public in October to rabid investor enthusiasm.

While those early wins are positive signs, the proof of the Vision Fund’s thesis will come early next year, when companies like Uber, Slack and Didi are expected to go public. If the returns prove favorable, then the fundraise for Vision Fund II may well come together quickly. But if the markets turn south and complicate the roadshows for these unicorns, it could complicate the story of how the Vision Fund exits out of these high-flying investments.

7. Murder is wrong. That makes the math for SoftBank really hard.

The tech media world went into a frenzy over Saudi Arabia’s horrific and horrifically public killing of dissident journalist Jamal Khashoggi. That put enormous pressure on SoftBank and its Vision Fund, where Saudi Arabia’s Public Investment Fund (PIF) is the largest LP with a $45 billion commitment.

There have been strong calls for Masayoshi Son to avoid Saudi Arabia in future fundraises, but that is complicated for one simple reason: there are just not that many money managers in the world who can a) invest tens of billions of dollars into firms backing risky technology investments, and b) are willing to ignore SoftBank’s massive debt stack and existential risks.

So SoftBank faces a tough choice. It can have its fund, but will need to get money from unsavory people. That might be fine — after all, Saudi Arabia is also the largest investor in Silicon Valley. Or it can walk away and try to find another LP that might replace the Kingdom’s huge fund commitment.

If the Vision Fund’s numbers look good after the early IPOs in 2019, I can imagine it being able to paper around Saudi Arabia’s commitment with a broader set of LPs that might be intrigued with technology investing and trust the numbers a bit more. If the IPOs stall though, whether because of internal company challenges à la pre-Dara Uber or broader market challenges, then expect a next fundraise to feature Saudi Arabia prominently, or for no fundraise to take place at all.

SoftBank: The Other Stuff

8. Good news on SoftBank’s Sprint side with its merger with T-Mobile looking like it will move forward

Since SoftBank acquired Sprint for $20 billion back in 2013, Sprint’s heavy debt balance has led to lackluster performance and the downgrade of SoftBank’s credit ratings to junk, where they’ve remained since.

After initial discussions stalled in 2017, SoftBank reinitiated merger discussions with T-Mobile’s German parent, Deutsche Telekom in 2018, eventually reaching an agreement for a Sprint/T-Mobile merger that would see SoftBank’s ownership stake fall from just over 80% of Sprint to just 27% of the combined entity.

Despite the poor track record for telco deal approvals and the increased scrutiny of cross-border M&A from U.S. regulators, SoftBank’s proposed merger recently received key approvals from the Committee on Foreign Investment in the United States (CFIUS), the Department of Justice, the Department of Homeland Security, and the Department of Defense. Part of that agreement came when SoftBank agreed to eliminate Huawei equipment from its infrastructure. While the deal still needs approval from the Federal Communications Commission, the road forward seems to be relatively clear.

If the deal ultimately goes through, SoftBank will no longer have to consolidate Sprint financials with its own and can instead report only its owned share of Sprint financials (and debt expense), improving (at least the optics of) SoftBank’s balance sheet.

9. SoftBank’s massive bet on Nvidia could be a $3 billion winner even as Nvidia faces crash

SoftBank became Nvidia’s fourth largest shareholder in 2017 after building up a roughly $4 billion stake in the company’s shares. As I detailed last week, Nvidia’s stock has gone into free fall over the past two months, as the company faces geopolitical turmoil, the loss of a huge revenue stream with the collapse in crypto, and an increasingly competitive battle in the next-generation application workflow space.

Now, SoftBank is reportedly looking to sell its Nvidia shares for possible profits of around $3 billion. As Bloomberg reported, that’s because the acquisition was built as a “collar trade” that protected SoftBank against a drop in Nvidia’s share price (a good reminder that even when a stock loses half of its value, it is entirely possible for people to still make money).

The opportunity though is that SoftBank almost certainly still wants to continue to play in the next-generation AI chip space, and needs to find another vehicle for it to hitch a ride on.

10. ARM could be the saving grace of chips for SoftBank

In 2016, SoftBank made its biggest purchase ever when it acquired system-on-a-chip designer ARM Holdings for $32 billion. ARM’s  designs were dominant among smartphones, which at the time was seeing rapid adoption and growth worldwide.

The good news hasn’t stopped since, although ARM has had to pivot its strategy in 2018 to adapt to changing market dynamics. Apple,  which has seen its next-generation iPhone sales stalling, has been rumored to be moving to using ARM chips for a wider array of its products, including its Mac lineup. Beyond that expansion, ARM is now increasingly designing chips for the data center, and engaging in next-generation markets around artificial intelligence and automotive. ARM’s CEO has said that he sees a path to doubling revenues by 2022, which shows a healthy clip of growth if that pans out.

There are headwinds though. Consolidation in the semiconductor space has been a theme the past two years, and that will allow the surviving companies to be more ferocious competitors against ARM. Up-and-coming startups could also crimp the company’s growth in next-generation workloads, a risk shared with other incumbents like Nvidia.

That said, ARM seems to be in a much more strategic position than Nvidia these days, as ARM has managed to maintain its linchpin role, and that should ultimately roll up to a valuation that SoftBank will be excited about.

11. Alibaba is putting heavy pressure on SoftBank’s balance sheet

While SoftBank has slowly been cashing in after winning big on its early backing of Alibaba, the company’s ownership stake still sits at roughly 29%.

SoftBank’s Alibaba ties have helped the company fuel its incessant appetite for leverage, with SoftBank using its stake in Alibaba as collateral for an $8 billion off-balance sheet loan, which prevented additional downgrades of Softbank’s credit. But a tougher macro backdrop and slowing sales growth have caused Alibaba to follow the precipitous decline of other Chinese tech stocks in 2018, falling nearly 20% year-to-date and 30% in the last 6 months.

That decline means tens of billions of dollars of losses for SoftBank’s already overstretched balance sheet, and as with many of these stories, will make financing its vision challenging in 2019.

And so we get back to the core theme of 2018 for SoftBank: debt, leverage, and financial wizardry in pursuit of a bold transformation into a technology investment firm. That transformation has certainly not been smooth, but it has moved forward bit by bit. If SoftBank can navigate the changes in the Japanese telco market, exit some major investments in its Vision Fund, and manage its big commitments in Sprint and Alibaba, it will reach its destination, with a few ultimately superficial bruises along the way.

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