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Will Saudi’s Public Investment Fund skip Softbank’s $100 billion Vision Fund II?

Nothing is guaranteed this time around for Softbank's second vision fund

Most investors in SoftBank Group Corp’s $100 billion Vision Fund want to join the group’s forthcoming second fund, Masayoshi Son said on Wednesday The total value of the conglomerate’s publicly traded shareholdings is around 21 trillion yen ($193.2bn), while SoftBank’s market cap is roughly 10.7 trillion yen ($98.4bn) The Wall Street Journal (WSJ) said SoftBank Group's bid to raise a second mega fund has met a chilly reception from some of the world’s biggest money managers

Softbank founder and Chief Executive Masayoshi Son is confident that $100 billion will be raised for his Vision fund II. He might be right but Saudi’s Public Investment Fund (PIF) may not be its biggest supporter.

After investing $45bn out of VisionFund I’s total of $100 billion, PIF has fewer incentives this time for a repeat performance.

Son in an interview about two months ago had said that they have already deployed about $70 billion from $100 billion Vision Fund I. Some of its most notable investments include Uber, WeWork, Doordash, GM Cruise, Paytm, Oyo and Slack.

Is Softbank confident, optimistic about Vision Fund II  

Most investors in SoftBank Group Corp’s $100 billion Vision Fund want to join the group’s forthcoming second fund, founder and Chief Executive Masayoshi Son said on Wednesday, adding discussions would begin soon.

According to Reuters, Investors in the first fund include the sovereign wealth funds of Saudi Arabia (PIF) and Abu Dhabi (Mubadala), Apple Inc and Foxconn.

The Vision Fund will ramp up its employee numbers to 1,000 from over 400 currently, Son said at the group’s annual general meeting.

The fund’s head, Rajeev Misra, said he sees investment rising to 100-150 companies, from around 80 at present.

Son said he wants to be the conductor in an AI-driven technological revolution.

The value of SoftBank’s investment portfolio could grow 33-fold to 200 trillion yen ($1.8 trillion) in 20 years, Son said. That’s an annual growth rate of 19%.

The fund’s annual net income has exceeded 1 trillion yen ($9.2bn) for the past three years.

The total value of the conglomerate’s publicly traded shareholdings is around 21 trillion yen ($193.2bn), while SoftBank’s market cap is roughly 10.7 trillion yen ($98.4bn), according to Yahoo Finance, adding that by the company’s own estimation, there is a discount of about 50%.

Vision fund talks underway

SoftBank and its bankers have held preliminary talks with sovereign wealth funds from Saudi Arabia, United Arab Emirates (Abu Dhabi), Oman, Singapore & Kazakhstan for its second $100 billion fund, Bloomberg reported citing a source familiar with the matter.

The report said that SoftBank is working with Goldman Sachs, Centricus and Cantor Fitzgerald for these fundraising efforts and will formally solicit investors in July, according to Menabytes.

According to Bloomberg, SoftBank could contribute $40 to $50 billion for the fund itself, after it had invested $28 billion in its first Vision Fund which had received $45 billion from PIF.

“But Saudi is unlikely to invest such a large amount partly because SoftBank wants to broaden its investor base,” people who spoke with Bloomberg said.  

SoftBank is investing $25bn in the PIF, targeted for $500bn NEOM and Saudi electricity company.

The report notes that SoftBank is aiming to close the second fund by March 2020.

Softbank made $7.7bn net income in H1 2018.

Son has skipped the kingdom's Future Investment Initiative (FII) business conference late last October, amid an ongoing investigation into the killing of Washington Post contributor Jamal Khashoggi but later said he is not turning his back on his investments with Saudi Arabia.

"These funds are important to the Saudi people in ensuring their economy diversifies and is no longer dependent on oil," Son said.

 According to the Wall Street Journal (WSJ), SoftBank Group Corp.’s bid to raise a second mega fund has met a chilly reception from some of the world’s biggest money managers, signalling that a crucial initiative for the firm faces significant hurdles.

“Several of these investors plan to make limited or no contributions. They include Canada Pension Plan Investment Board and Saudi Arabia’s Public Investment Fund,” it said.

The Vision Fund has been a cash drain for PIF, which has also made other significant commitments like to Blackstone Group LP’s big infrastructure fund.

“It couldn’t be determined if PIF has the money to make another sizable commitment,” said WSJ.