SoftBank Group Corp. said it will form a new fund to invest as much as $100 billion (about ¥10 trillion) in the global technology industry in the next five years, partnering with Saudi Arabia’s public investment fund to find tech companies that will become influential in the future.
The Saudi government will consider putting money in the tentatively named SoftBank Vision Fund and becoming the lead investment partner, with a potential investment size of as much as $45 billion over the next five years, SoftBank said in a statement Friday. SoftBank, which will invest as much as $25 billion, said it signed a nonbinding memorandum of understanding with the Saudis. Other large global investors may participate, the company said, with the total possible size of the fund reaching up to $100 billion.
SoftBank has profited to the tune of tens of billions of dollars in returns from investments in companies including Alibaba Group Holding Ltd., Yahoo and Supercell Oy, and the Vision fund will likely pursue a similar strategy of backing technology companies at all stages.
The announcement comes just three months after Son made the biggest bet of his life with the $32 billion acquisition of chip-maker ARM Holdings PLC, a wager on the future of interconnected devices.
“It’s conceivable that after capturing the core of the internet of things with ARM, he will next look to other semiconductors, electronic components and software,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “SoftBank has a proven track record of investment successes. They are looking for another Alibaba.”
Meanwhile, Saudi Arabia is preparing itself for the twilight of the oil age by expanding its Public Investment Fund, which could eventually control more than $2 trillion, Deputy Crown Prince Mohammed bin Salman told Bloomberg News in April. The fund made a $3.5 billion investment in ride-hailing company Uber Technologies Inc. in June.
“Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector,” Masayoshi Son, chairman and chief executive officer of SoftBank, said in the statement. “We will further accelerate the information revolution by contributing to its development.”
SoftBank shares rose 3.29 percent at the close of trade in Tokyo on Friday. The stock had gained 5.8 percent this year before Friday, compared with a 12 percent decline in the benchmark Nikkei 225 average.
The mega-fund, which may target some companies traditionally backed by venture capital firms, comes during a record year for the venture industry.
U.S. venture firms raised $32.4 billion through the third quarter of 2016 — an amount which is on pace to be the largest of any since the dot-com boom, according to trade group National Venture Capital Association.
SoftBank declined to comment further, noting the fund had not yet closed. The company said in a statement to the Tokyo Stock Exchange that the fund will be reflected on its consolidated financial statements, without giving further details.
SoftBank is stepping up investment activity even though it has more than $100 billion debt. The company has relied on borrowing and earnings from its domestic telecom operations to pay for investments in startups in India, the U.S. and China while balancing losses at its U.S. subsidiary Sprint Corp.
The company’s high-speed internet and wireless services in Japan generated ¥1.16 trillion in earnings before interest, taxes, depreciation and amortization in the fiscal year ended March 31. SoftBank has ¥3.5 trillion of bonds maturing in the next five years, according to data compiled by Bloomberg.
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