November 9, 2018 / 3:04 AM / 7 days ago

Breakingviews - SoftBank investment lines gets blurrier at edges

Japan's SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon

HONG KONG (Reuters Breakingviews) - SoftBank’s many investments can be hard to see clearly. The nearly $100 billion Vision Fund, backed by Saudi Arabia’s Public Investment Fund, held 38 stakes at the end of September. Some of the biggest and best-known weren’t among them. Following these deals creates a blur.

Boss Masayoshi Son’s Vision Fund is capable of hugely influential transactions such as the $15 billion-plus injection of additional capital into office-sharing upstart WeWork that is under discussion, according to news reports. For all the fund’s firepower, though, holdings sometimes end up elsewhere in the SoftBank sprawl.

A $5 billion investment in China’s Didi, originally made by SoftBank, is now housed in another vehicle known as the Delta Fund. It is separate from, but generally mentioned alongside, the Vision Fund since it was revealed in 2017.

A big stake in U.S.-based Uber, meanwhile, is held by SoftBank, though it’s one of several that may be transferred to the Vision Fund later. The Saudi fund has its own direct investment in Uber, one reason other ride-hailing stakes are not yet in the Vision Fund. The backing of General Motors’ self-driving unit, GM Cruise, was originally announced in May as from the Vision Fund but ultimately was made by SoftBank.

It all adds up to another challenge when trying to understand Son’s $85 billion company, whose stock trades at a wide discount to the theoretical value of its various businesses and investments.

There are other foggy spots, too. SoftBank moved two investments into the Vision Fund last quarter: Korean online retailer Coupang and Indian hotel-reservations startup Oyo. Coupang’s transfer value was marked down 30 percent from the $1 billion SoftBank paid for it, while Oyo was marked up to around $200 million from the original $100 million.

Having an investment committee review such transactions helps. But because ownership of SoftBank and the Vision Fund differs, it could be awkward if, say, the company’s Uber stake is shifted to the fund at a price that is promptly contradicted by the planned 2019 initial public offering. How the young fund fits with SoftBank remains a work in progress. For now, it’s depriving investors of full visibility.

Breakingviews

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