SoftBank Group Corp. Chief Operating Officer Marcelo Claure has advocated for a spinoff of the company’s Latin American investment fund, putting him at odds with founder Masayoshi Son, who disagrees with the move, according to people familiar with the discussions.
The Latin American venture isn’t as high-profile as SoftBank’s mammoth Vision Fund, but it has grown to $8 billion in assets since its launch in March 2019. The initial fund, under Claure’s leadership, has backed 48 companies and generated an internal rate of return of 85% in U.S dollar terms.
Claure sees a spinoff as a way to build the business, create value for SoftBank and boost his own compensation, said the people, asking not to be identified because the matter is private.
There has been “no discussion of spinning out SoftBank’s Latin American Fund,” Son said in a statement from the company. “Second, Marcelo and I have a strong relationship and he is a valuable member of the SoftBank team.”
The 50-year-old Bolivian-American has often pushed for more authority and money, the people said, though he was SoftBank’s second-highest paid executive last year and became a billionaire when he sold his cellphone distributor to SoftBank in 2013. He has suggested he deserves as much as $1 billion in part because he led the turnaround of Sprint Corp., which SoftBank sold to T-Mobile U.S. Inc. last year for about $37 billion. SoftBank loaned Claure capital to buy a $500 million stake as part of the T-Mobile deal.
It’s possible Claure could leave SoftBank over the disagreement with Son, said the people, although the COO has floated the idea of resigning in the past without actually doing so. Despite their different opinions over the Latin America spinoff, the two men have developed a close relationship since SoftBank bought a majority stake in Claure’s Brightstar Corp. in 2013.
“Marcelo can be mercurial, but I don’t think it will come to that,” said one person of the prospect Claure will leave.
Son has raised his global profile since starting the Vision Fund in 2017, creating an unprecedented investment vehicle of almost $100 billion to back technology startups. But the 64-year-old has struggled to persuade investors of the value of his efforts, in part because of fiascoes with companies such as WeWork Cos. and Greensill Capital.
The Vision Fund organization, which now includes a second $40 billion fund, has had blockbuster successes, including Korean e-commerce pioneer Coupang Inc. and delivery service DoorDash Inc. However, SoftBank’s own stock chronically trades far below the value of its assets and has tumbled more than 40% from its peak in March. SoftBank estimates the value of its assets at ¥15,450 a share ($135), net of debt, compared with SoftBank’s own share price of ¥6,238 at Monday’s close.
The stock rose 1.5% in Tokyo on Tuesday.
Son and his advisors have debated for years how to close that valuation gap, considering everything from going private to shedding assets. While early discussions of spinning off the Vision Fund faltered, Claure sees separating out the Latin American fund as a viable strategy, the people said. The venture doesn’t have the troubled history of the Vision Fund, and its track record has been quite strong.
SoftBank said last month it had invested in 15 of the 25 Latin American “unicorns” — startups worth $1 billion or more — including the Colombian delivery app Rappi and Brazilian workout service Gympass. Claure has also taken the lead in crypto investments at SoftBank, backing the exchange Mercado Bitcoin.
Son sees little merit in a spinoff for SoftBank shareholders and thinks it would unnecessarily complicate management and governance, the people said. If Claure’s Latin America fund had additional stakeholders, SoftBank would have to navigate conflicts of interest in deal-making and profit distributions. The fund’s small size relative to the Vision Fund makes such extra burdens unpalatable, the people said.
Claure, who was promoted to COO in 2018, has been Son’s go-to lieutenant for tackling difficult operational challenges. He took over as chief executive officer of Sprint and then helped salvage WeWork after its failed initial public offering. He remains chairman of WeWork, which is poised to go public in late October under the leadership of Chief Executive Officer Sandeep Mathrani.
But as Son repositioned SoftBank away from running technology companies to an investment-holdings model, Claure’s operating expertise has grown less essential. Besides selling Sprint and taking WeWork public, SoftBank spun off its Japanese telecom business and agreed to sell chip designer Arm Ltd. to Nvidia Corp.
Claure, who is also CEO of SoftBank’s international arm, has competed for additional responsibilities at times with Rajeev Misra, the head of the Vision Fund. Though the two men clashed in the past, their relationship has improved. Claure has said internally he will be a “unicorn hunter,” going after startups that don’t fit at — or don’t want to deal with — the Vision Fund.
SoftBank has long paid its top executives far more than their counterparts at other Japanese companies, which are known for modest compensation compared with global peers. The company’s Tokyo staff has balked at efforts of foreign executives to get more compensation. Claure not only made 18 times what Son did, his pay was about triple that of the ¥635 million made by Ken Miyauchi, head of SoftBank’s domestic telecom operation.
Son has structured deals at SoftBank to boost his own renumeration beyond that base compensation. When SoftBank set up a unit called SB Northstar to trade public stocks and derivatives, the founder took a 33% personal stake in the operation.
In August, SoftBank disclosed that Son will personally co-invest in Vision Fund 2 and own 17.25% of the equity, a controversial move because of the potential for conflicts of interest. He will have a similar arrangement with Claure’s Latin America fund.
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