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Masayoshis­onnow owes Softbank Us$4.7bil

Side deals set up to boost his compensati­on

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TOKYO: Masayoshi Son is now personally on the hook for about Us$4.7bil (Rm21.4bil) on side deals he set up at Softbank Group Corp to boost his compensati­on, after mounting losses in the company’s tech portfolio wiped out the value of his interest in the second Vision Fund.

Over the years, the Japanese billionair­e’s controvers­ial personal stakes in Softbank’s investment­s drew fire from investors, who pointed to the mix of personal and company interests as a corporate governance concern.

Son – who holds a more than 30% stake in Softbank – has denied there was a conflict of interest and said it was remunerati­on for his investment expertise, in lieu of investment fees.

The move has backfired, enveloping Son’s personal finances in the downside of the world’s biggest tech investor’s bets.

Son was down more than Us$4bil (Rm18.2bil) on his side deals through the June quarter, Bloomberg News reported earlier.

Son last week said he was stepping away leading earnings calls, to focus on preparing chip designer Arm Ltd for a public listing – an event that would give Softbank fuel to again pursue new investment­s.

Softbank will bide its time in a tech winter and pay down its debt, he and his lieutenant­s said. Softbank’s Vision Fund arm posted a Us$7.2bil (Rm32.8bil) quarterly loss last week, driven by the declining value of portfolio companies such as Sensetime Group Inc, Doordash Inc and Goto Group.

The company has been selling off assets to raise cash and shore up its balance sheet, posting gains from selling a chunk of its stake in Alibaba Group Holding Ltd.

“We need to go full-on defence,” Softbank chief financial officer Yoshimitsu Goto said. “Softbank is pessimisti­c on the outlook. We do not yet see the light.”

The 65-year-old Son holds 17.25% of a vehicle set up under Softbank’s Vision Fund 2 for its unlisted holdings, as well as 17.25% of a unit within its Latin America fund, which also invests in startups.

He has a 33% stake in SB Northstar, a vehicle set up at the company to trade stocks and derivative­s. Portfolio losses ratcheted up Son’s deficit to about Us$2.8bil (Rm12.8bil) from his Vision Fund 2 interest, and Us$252mil (Rm1.15bil) at the Latam fund, according to disclosure­s for the September quarter.

His remaining deficit at SB Northstar was 233.6 billion yen (Us$1.6bil or Rm7.3bil).

The amount Son owes Softbank from his interests in Vision Fund 2 and the Latam fund rose about Us$750mil (Rm3.42bil) in the last quarter, according to Bloomberg calculatio­ns, confirmed by Softbank.

Son’s interests in Vision Fund 2 and the Latam fund were structured so the billionair­e didn’t pay cash up front for his 17.25% stakes. Son is obligated to pay 3% on the “unpaid equity acquisitio­n amount” until repayment, interest that has been wrapped into his liabilitie­s.

There is no deadline for repayment and the value of Son’s positions could improve in the future, and for SB Northstar, Son has already deposited some cash and other assets.

The founder would pay his share of any “unfunded repayment obligation­s” at the end of the fund’s life, which runs 12 years with a two-year extension.

Son has deposited 8.9 million of his own shares as collateral for Vision Fund 2, and another 2.2 million shares as collateral for the Latam fund, the company said in its disclosure­s. The stock will only be released once the receivable­s are settled.

Son’s net worth stood at Us$12.7bil (Rm57.8bil) after last Thursday’s close, after adjusting for his deficit from his interests in Vision Fund 2 and Latam fund, according to calculatio­ns by Bloomberg Billionair­es Index.

Shares in Softbank closed down 3.9%, paring losses that had rocketed the stock to a oneyear high last week. Its shares are up 12% from the start of the year.

“We need to go full-on defence. Softbank is pessimisti­c on the outlook. We do not yet see the light.” Yoshimitsu Goto

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