are based on their employees, including the Chief Executive
The Japanese company plans to lend its employees up to $ 20 billion for buying shares in its second huge venture capital fund. Mr. Son could account for more than half of that amount, some people said.
It's an unusual setup that would expose SoftBank to a double startup economy that begins to show cracks. The IPO window, which seemed open at the beginning of this year, could close as markets fall and public investors are tired of launching start-ups with losses.
With $ 20 Billion, the pool of employees would make up nearly one-fifth of the money given by SoftBank Last month, it signed up for its second Vision Fund, a follow-up to a $ 1
A spokesperson for the Vision Fund did not comment.
SoftBank announced it would have $ 108 billion from investors, including
, the Government of Kazakhstan and half a dozen banks. These commitments are non-binding and are finalized in a turbulent phase for start-ups, including some of the Vision Fund's largest investments.
have fallen 30% since the IPO in May. The stock is now trading below the level of approximately $ 35 paid by SoftBank for the purchase of its shares.
WeWork, another major investment in the Vision Fund, has filed for IPO this week, reporting huge and growing losses quickly, even for Silicon Valley ratios. It will require large sums of money for years as it builds offices, which could impact the recent $ 47 billion valuation that an analyst described as "very difficult to swallow" given the company's huge losses.
Most mutual funds simply give their employees part of the profit as part of their compensation. Investors like to see such "skin in the game".
But SoftBank is instead lending to employees – about 400 employees – to buy those shares. The same thing happened with the first fund, which now has around $ 8 billion in employee compensation, according to those familiar with the matter. Lending increases the leverage of the Fund's already risky investments and underlines the unusually close relationship between SoftBank and the Fund.
SoftBank executives believe that this increases the responsibility of employees as the fund's investments can be canceled if a manager leaves the company or finds a ruthless deal, the people working with their company said Thinking are familiar. SoftBank also believes that its large commitments to the Vision Fund are a selling point as it aligns its own interests with those of external investors.
If start-up valuations remain high and Vision Fund companies grow and go public, employees can repay their loans with gains on fund shares. However, if it falter, SoftBank can lose money on the loans.
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Much of Mr. Son's fortune is in his shares of SoftBank itself, which he may need to sell to repay the loans. The loans are expected to interest at an interest rate of about 5%, said one of the respondents.
Other investors in the fund include the government fund of Kazakhstan, which is expected to contribute approximately $ 3 billion. Including banks
Goldman Sachs Group
Standard Chartered PLC and Japan
Mitsubishi UFJ Financial Group
have signaled that they are willing to invest several hundred million dollars apiece, which bankers believe is a way to do business and IPOs for Vision Fund's portfolio companies. Some respondents said that they were hoping for it Investment will exceed $ 30 billion. Taiwan's insurers are looking for higher-yielding assets to bridge the gap between the promised payouts for older policies and the revenues they are now earning.
Large-scale investments could be a burden on them, however, as Taiwanese regulations only allow them to invest a fraction of their assets in riskier assets such as venture capital.
-Phred Dvorak contributed to this article.
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