SoftBank Earnings and Vision Fund Performance

Today, SoftBank released its earnings report, detailing the performance of its substantial $98.6 billion Vision Fund. The financial results are noteworthy, particularly considering the recent successful exit from its investment in DoorDash. This exit generated billions in returns for SoftBank and stands as one of the fund’s earliest and most significant triumphs.

Investment Exits and Incentive Adjustments

To date, SoftBank has facilitated exits from 18 investments. This includes ten that have been fully realized and an additional eight that are currently publicly traded on stock exchanges.

However, a significant detail was revealed within the earnings statement: the performance incentive allocated to the Vision Fund’s leadership has been halved. It has been reduced from $5 billion to $2.5 billion.

The History of the Incentive Scheme

The initial $5 billion incentive plan sparked debate when first reported by publications such as the Financial Times in April 2018. The structure involved SoftBank providing loans to its employees, enabling them to invest in the Vision Fund. This was strategically designed to expedite the fund’s $100 billion fundraising efforts.

The company initially disclosed details of this incentive scheme in its Q2 2018 earnings report. Subsequent quarterly reports consistently referenced the $5 billion figure.

In the latest fiscal 2020 Q3 earnings, SoftBank announced a revision, stating that the incentives now total “$2.5 billion (decreased from the previous $5.0 billion).”

Executive Investments and Industry Reaction

The incentive scheme has been a focal point of discussion among industry analysts. A recent report in the Financial Times revealed that four top SoftBank executives – Rajeev Misra, Marcelo Claure, Katsunori Sago, and Ken Miyauchi – collectively received $600 million in loans to invest in the Vision Fund.

A portion of these funds originated from the $5 billion (now $2.5 billion) incentive scheme, though the exact allocation remains unclear.

Reasons for the Incentive Reduction

SoftBank’s decision to reduce incentives appears to be a direct response to the Vision Fund’s overall performance, which has been mixed. The fund’s problematic investment in WeWork, resulting in substantial losses for the telecom group, was a major contributing factor.

While recent performance has improved, decreasing these incentives is expected to positively impact the fund’s overall performance and, consequently, SoftBank’s profitability.

Current Investment Strategy

Vision Fund I has ceased making new investments since last year. A second fund, capitalized with $10 billion entirely from SoftBank, continues to make regular investments.

Furthermore, the Vision Fund is actively establishing Special Purpose Acquisition Companies (SPACs), with two new ventures announced late last week.