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You don't need a reminder: Silicon Valley has hit an epic low recently. While spectacular stock collapses at Netflix and Meta grab headlines, it's would-be high-profile start-ups taking the latest body blows.
That's in part because SoftBank, the investment juggernaut that's served as a free-flowing spigot of money for tech start-ups, is beginning to slow its spending to a comparative dribble.
Green Light, Red Light
Founded by Japanese billionaire Masayoshi Son, who amassed most of his fortune via ground-floor stakes in Yahoo and Alibaba, SoftBank helped put start-ups like Uber and WeWork on the map thanks to its founder's penchant for recruiting an army of maverick entrepreneurs with visions of industry disruption and tech-enabled economies of scale. Its Vision Fund, a $40 billion tech-focused venture backed by billions from the sovereign wealth funds of Saudi Arabia and Abu Dhabi, garnered particular fame for adhering to a strict rule of $100 million investment minimums.
The firm invested at a breakneck pace last year, completing 195 deals, as reported in The Financial Times. Yet the recent tech downswing, particularly among Chinese companies, has SoftBank sweating. Its stake in Alibaba alone has plummeted from $208 billion in November 2020 to $69 billion this March amid China's crackdown on the tech sector. On Monday, Bloomberg reported that Son is advising his executives to slow the pace of investments:
- Nearly all of the listed Chinese companies in which it has invested are currently trading below their purchase price, according to FT. The billions SoftBank invested in online education firms are at particular risk after the Chinese government banned profit-making in the sector last summer.
- SoftBank's largest investment in China, the ride-hailing app Didi, is roughly $9 billion in the red, per FT reports, after Beijing launched a national-security-tinged investigation of the company.
Personal Stakes: SoftBank's stock is down over 50% in the past year, and its estimated writedown this quarter is between $20 and $30 billion, sources tell FT. Some analysts believe the firm can right the ship, but Son, who owns roughly a third of the company and has taken out personal loans against his stake in SoftBank to invest in the Vision Fund, is growing "very concerned" about the rising collateral. Perhaps the billionaire Son has flown a little too close to the... sun.