Masayoshi Son Ends Seven-Month Silence to Make Case for SoftBank’s Future

Min Jeong Lee and Takahiko Hyuga

Mon, Jun 19, 2023, 11:17 PM 4 min read

“A huge revolution is coming,” he said at Japanese telecom unit SoftBank Corp.’s annual shareholder meeting on Tuesday, adding that it was the parent company’s job to make aggressive early investments. “SoftBank Group won’t be deterred by a few short-term losses. We will rule the world in the end.”

The billionaire broke his months-long silence after bidding adieu to SoftBank Group’s loss-laden earnings call, saying he wanted to focus on taking Arm Ltd. public. His absence has left cash-strapped startups wondering if the world’s biggest tech investor will ever go on the offensive again.

But Son says he’s been busy, exploring generative AI’s transformative potential for the Japanese firm’s more than 400 portfolio companies. For example, the 65-year-old said he talks frequently with OpenAI Inc. CEO Sam Altman about ways SoftBank’s domestic search engine operator Z Holdings Corp. can channel generative AI phenom ChatGPT for Japanese language users.

“We will not rest. We will be ever more fierce,” Son said, suggesting SoftBank will continue to shift gears away from total defense. “With Arm at the core, we will continue to pursue arenas including in quantum.”

The debt-laden and loss-churning parent company is hosting its own shareholders’ meeting in person for the first time in four years on Wednesday. Son is expected to speak more on Arm’s positioning.

Prospects for the chip design unit’s initial public offering have brightened recently, buoyed by hype around generative AI and talks with potential anchor investors including Intel Corp. Arm is seeking to raise as much as $10 billion, Bloomberg News reported, and brokerages are revising up their SoftBank stock price targets. The company’s shares have gained about 25% so far in the June quarter, heading for their best quarterly performance in three years.

But the outlook for SoftBank’s flagship Vision Fund investment unit remains bleak. Slumping tech valuations have forced it to shoulder billions of dollars in losses for five straight quarters. Investments at SoftBank’s funds have ground to a virtual halt, forcing belt-tightening throughout the startup ecosystem.

SoftBank invested in seven startups through funding rounds totaling about $550 million so far in the June quarter, data compiled by Bloomberg show. For reference, the Vision Fund segment spent $15.6 billion in the same quarter just two years ago.

“I’ve made many, many mistakes in my AI investments, some of them embarrassing,” Son said, “But among the many failures, there are a number of buds that will blossom very soon.”

Here is what investors and analysts are saying:

Astris Advisory (Kirk Boodry)

It’s hard to say whether the message on defense-mode will change significantly, but “even if Son is delivering the same message, he’s going to sound much more optimistic and focused on the technology as opposed to the balance sheet, like Goto would.”
Sentiment plays a part in Arm. “They have to balance two things — they want to maximize the money they raise in selling equity because that goes right to SoftBank, in the heart of its valuation. But they also don’t want a situation they’ve had with a lot of their IPOs where it goes public and then everything goes down in value.”
“The real wild card here is how public markets perform and that’s the thing that no one has any control over, and unfortunately still has a lot to do with the timing and valuation of Arm.”

Asymmetric Advisors (Amir Anvarzadeh)

Son’s reported meeting with OpenAI’s Sam Altman sets the stage for the founder and billionaire to make “a grand comeback” with big names to drop at the shareholder meeting.
Son is likely to claim SoftBank is Japan’s purest AI play for its size. “Those who know Son are very familiar with this script and yet another timely rescue by a thematic market.”

Comgest Asset Management (Richard Kaye)

“Son could explain his long view of the Vision Fund –- a Darwinian instrument to select the strongest future technology companies with a view to consolidating those, or a regular fund looking to buy and exit?”
SoftBank’s Japan businesses Z Holdings Corp. and SoftBank Corp. should be important sources of growth, bringing together the group’s bright spots like messaging service LINE and digital payments platform PayPay. “But I think some investors have been disappointed waiting for this story to work. If Son can give some comfort on that area, it would help.”
“It would be very helpful to understand better Son’s own role, where he spends time and whether he will return to addressing investors. Yes, I would to like see him back.”

--With assistance from Edwin Chan and Kurt Schussler.

(Updates with SoftBank CEO’s appearance and comments at mobile unit’s shareholder meeting)

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