We've seen this movie before.*
From Bloomberg, October 9:
SoftBank Group Corp. is in talks to borrow $5 billion from global banks, refilling its coffers at a time Masayoshi Son is accelerating the Japanese investment firm’s bets on artificial intelligence.
SoftBank is close to signing a deal with a handful of lenders for a margin loan secured by shares of its chip unit Arm Holdings Plc., people familiar with the matter said. The capital will fund additional investment in OpenAI this year, the people said, who asked not to be identified discussing private matters.
A margin loan is a type of facility where you borrow money using your investments — like stocks — as collateral. A representative for SoftBank declined to comment.
Softbank shares slid as much as 4.1% to 22,020 yen on Friday, the most since September 26, before pairing some losses to close down 3.1%, according to Bloomberg-compiled data. Meanwhile, the group’s dollar bond due in 2032 declined about 1 cent on the dollar to 102.7 on Friday, its biggest drop since the note was issued in July, the data showed.
Founder Son has embarked on a spending spree this year to try and position the firm as a linchpin in the global AI boom, most recently pledging as much as $30 billion toward OpenAI and buying ABB Ltd.’s robotics arm for $5.4 billion. Arm’s 38% rally this year has in turn granted SoftBank the confidence and leeway to grow its investment war chest.
SoftBank has raised a total of $13.5 billion in margin loans from Arm shares, with $5 billion still undrawn, as of March 2025, according to its earnings statement. The latest facility will increase the total to $18.5 billion.
The group had secured about $8 billion in margin loans ahead of Arm’s initial public offering in 2023. Eleven banks including JPMorgan Chase & Co., Barclays Plc, BNP Paribas SA, Credit Agricole Corporate and Investment Bank and Goldman Sachs Group Inc. provided the facilities by linking mandates for Arm’s IPO to the loans. Earlier this year, the group also raised a $15 billion one-year facility to help fund AI investments in the US, in what is among its largest borrowings raised....*****....Son’s insatiable appetite for deals has extended far and wide, centered on ideas to capitalize on the expected exponential growth of AI technologies.His most ambitious projects include a $500 billion Stargate initiative that aims to build data centers across the US in partnership with OpenAI and Oracle Corp. SoftBank is also exploring the feasibility of a large-scale industrial manufacturing hub in the US, which could encompass production lines for AI-powered industrial robots, Bloomberg News has reported.
....What Bloomberg Intelligence Says
SoftBank Group’s $5.4 billion acquisition of ABB’s robotics arm demonstrates the company’s large M&A appetite, raising credit and bond-supply risks. The company may hit its 25% loan-to-value limit with this deal, along with a $22.5 billion second-tranche investment in OpenAI, the purchase of Ampere Computing and its investment in Stargate, though tech stock values may provide some offset. Funding needs may exceed $30 billion, but asset sales and asset-backed financing could lower reliance on bond markets.
- Sharon Chen, analyst
....MUCH MORE
*April Fools Day, 2025:
"How Is SoftBank Funding Its Mega Investment in OpenAI? A Lot of Debt"
Leveraged beta, baby!
....As we noted introducing last week's "OpenAI Close to Finalizing A $40 Billion SoftBank-Led Funding At A $300 Billion Valuation"
SoftBank's Mr. Son's entire history, going back to the dot.com bust is leveraged beta.
He was very fortunate that the British didn't allow Nvidia to buy ARM Holdings, thus clearing the way for his bid. Otherwise his claim to fame would be being the largest investor in WeWork....
And from November 2019:
SoftBank’s problems aren’t so surprising if you understand this one thing about the company
Throughout the manic phase of SoftBank and the Vision fund there was almost no mention of the fact that at the start of this century Masayoshi Son was the richest person in the word:
"But Son’s fairytale didn’t last long. After the dot-com bubble burst, his company Softbank’s shares plunged 75 percent in two months and was 93 percent lower by the end of 2000.We had a couple posts around the time of the above that touched on the craziness but not the past history:
The business almost went bankrupt and Son ended up losing USD 70 billion, the highest ever recorded financial loss for a person in history."
—MoneyControl, October 13, 2017
SoftBank In Talks To Acquire U.S. Treasury
Sprint, T-Mobile Plunge: SoftBank Calling Off Merger, Will Use Cash to Buy Canada
See also semi-variance, after the jump....****When the swings are as big as Son's are you need a bankroll that is gigantic. Even if you are right and have an edge, the natural variation can kill you and the last downturn will be the last downturn.
Some related links:....
Having observed Mr. Son and his position in the parade—from Drum Majorette leading the way, to being the guy cleaning up after the elephants, and then back to the front— we had this introduction in February 2024:
Since the time he almost went broke after the dot.bomb bubble burst (he had briefly been the richest person in the world) I've come to realize this guy isn't some great visionary/grand strategist; he's just leveraged beta. Making big bets, all geared up, on whatever is at the head of the passing parade.
That said, he owns 90% of ARM Holdings and I don't.
Bastard.
February 2020:
The First Time SoftBank's Masayoshi Son Went Broke
Leveraged beta.
It can work for a very long time, long enough that its practitioners start believing they are invincible when they aren't.....
....We had a couple posts around the time of the above that touched on the craziness but not the past history:
SoftBank In Talks To Acquire U.S. Treasury
Sprint, T-Mobile Plunge: SoftBank Calling Off Merger, Will Use Cash to Buy Canada
See also semi-variance, after the jump....
