Good. I'm not kidding when I say Mr. Son's penchant for leveraged beta could be a threat not just to the AI players but to the world economy. If the largest domino starts dropping it's hard to see it stopping short of a coordinated international bailout.
Keep an eye on 9984 - Tokyo Stock Exchange. Here's the last year of price action via TradingView:
From Bloomberg, June 9:
SoftBank Group Corp.’s talks with potential creditors to raise at least $6 billion from a margin loan backed by its OpenAI stake have stalled, people familiar with the matter said, just weeks after the Japanese conglomerate cut its initial target from $10 billion.
The company is considering various fundraising options, according to the people, who asked not to be identified discussing private matters. It could still move forward with the margin loan at a later stage, they added.
It’s unclear why the margin loan discussions stalled. Borrowers and creditors can pause and revisit fundraising discussions for various reasons, and SoftBank hasn’t elaborated on its plans, the people said. SoftBank had secured some $5 billion for the loan before the development, people familiar with the matter said, though it was unclear if those were verbal or written commitments.
SoftBank declined to comment.
The current inaction on the margin loan comes even after some of the potential lenders who had been pitched on it said that they’d started to consider it in a more favorable light, after news last month that the ChatGPT creator was preparing to file for an initial public offering. OpenAI said on Monday that it has filed confidentially for an IPO in the US, joining artificial intelligence rivals in tapping public markets to fund ambitious growth plans. The firm is working with Goldman Sachs Group Inc. and Morgan Stanley on a potential listing as soon as in the fall.
Markets have witnessed a broader debate in recent months about SoftBank’s commitments of more than $60 billion to OpenAI at a time when recent breakthroughs by rival Anthropic PBC have raised doubts for some investors about the business. Within SoftBank itself, some officials had grown anxious about that commitment.
Previously some of the potential creditors pitched on the margin loan had expressed concerns about the difficulty of reaching a valuation for an unlisted company like OpenAI. SoftBank had downsized the loan’s initial target size by 40% after facing hesitation from some of the potential lenders, people familiar with the matter said in May.
The Japanese company has been ramping up its broader AI plans. Late last month, it said that it plans to invest as much as €75 billion ($86.6 billion) to build artificial intelligence data center capacity in France, saying the country is poised to become a top European hub for AI infrastructure.
Looming in the background is a $40 billion bridge financing that supported the conglomerate’s investments in OpenAI, and which SoftBank must repay in March 2027. SoftBank has said that borrowing would likely be repaid “through the utilization of existing assets and other financing measures.”....
....MUCH MORE
Recently:
June 2 - "AI revolution is ‘50x bigger’ than the dot-com boom: SoftBank’s Masayoshi Son to CNBC"I assume Mr. Son is aware the term "dot.com" does not have the best connotations.
May 31 - SoftBank Says It Will Invest Up To €75 Billion To Build Data Centers In France
May 13 -"SoftBank profit more than triples to $12 billion on OpenAI stake gains"
As noted introducing April 22's "SoftBank Seeks $10 Billion Margin Loan Backed by OpenAI Shares":
This is where the risk to the AI juggernaut and possibly the world economy is lurking.
Should SoftBank be unable to repay or refinance the debts it is taking on, the risk goes from theoretical to kaboom pretty fast and all the other daisy-chain financings get stress-tested in a real-world cascade.
And unfortunately chatbots in general and OpenAI/Sam Altman in particular may not be the future that Mr. Son seems to think.
Before that it was February 12's "Where Will SoftBank Get The Money To Fund Their Commitment To OpenAI?":
By writing-up their stake in OpenAI, naturellement.
And March 27:
"SoftBank Obtains $40B Bridge Facility for Additional OpenAI Investment"
Of all the possible weak links in the daisy-chain, and there are a few, SoftBank's increasingly central role is the most concerning.
Mr. Son's history, going back to the time he briefly held the title of world's richest person, is leveraged beta. No great technological insight (largest investor in WeWork) no fancy risk mitigation, just leverage in all its forms and like Sam Insull, at every level of the organization.
Throw in the fact that OpenAI and their ChatGPT may not be the ultimate winner of this unprecedented build-out and there are reasons to be hyper-aware. Stay tuned.
That said, this loan should be okay (barring a depression where it can't be re-financed, à la Insull) it's all the other borrowings and what Mr. Son will do in the next couple years, that could cause worldwide problems.
And last year:
November 2025's - "SoftBank shares slide as Nvidia stake sale highlights AI funding needs"
That was a rookie fund manager's move, using your most liquid asset to fund your least liquid.
In the olden days proprietary traders/stock jobbers/proto-market makers would keep their share and bond certificates in a box—hence short against the box etc. And in that box the most speculative, least-liquid-in-a-crash certificates were on top ready to be tossed into the maw of a descending market, with the highest quality, most liquid shares at the bottom of the box.
It was a tell as to either the individual trader's finances or to the depth of a downturn to see certs from the bottom of the box coming onto the market.
As a side note, you can still get your stock in certificate form but it will cost you at least $500 per cert. The powers that be, Depository Trust, the brokers et al. really prefer you don't ask for the paper.
And dozens more.
Possibly also of interest:
April 28 - WSJ Exclusive: "OpenAI Misses Key Revenue, User Targets in High-Stakes Sprint Toward IPO"
April 28 - "OpenAI-Linked Stocks Slump on Report of Startup Missing Targets"
