Masa Son’s multi-generational vision is running into a brick wall: The public markets

SoftBank is learning the biggest obstacle to success for its $100 billion Vision Fund are the public markets. That’s where fall and CEO Masayoshi Son’s long-term ambitions are colliding head-on with the near-term expectations of Wall Street.

The theme of Son’s Vision Loot, which has already deployed more than $70 billion in dozens of companies (primarily privately held technology circles) is to bet big and move quickly. In one of the fund’s first press releases, SoftBank explained the purpose was to expedite building businesses that pass on make the next stage of the Industrial Revolution possible, requiring “unprecedented large scale long-term investment.”

Go lames consistently gush over Son’s emphasis to move faster with expansion efforts and become No. 1 in their substance area of business, no matter the associated costs. Son encourages his investments to push for as much market share as possible, using mount as their moat to competitive threats.

But long-term investment in growing technology companies is easier when those performers don’t have quarterly projections to hit and pressure from public investors to show consistent earnings growth. This week’s information that public investors are valuing WeWork at less than $25 billion after SoftBank’s latest investment in January patent the company at a $47 billion valuation should give Son pause. Maybe going public doesn’t always succession up with the goals of the Vision Fund.

Of course, the Vision Fund isn’t a Kumbaya charity program. It’s a late-stage venture matchless/private equity fund, with investments from SoftBank, sovereign wealth funds from Saudi Arabia and The Opinion Arab Emirates, and other technology companies including Apple, Qualcomm, Foxconn and Sharp. Everyone in the fund is there to go-ahead money, and in order to make money, investments need to be liquid. Going public is still the best way to make this befall.

Still, public monetization seems to be the biggest wrench in SoftBank’s long-term strategy. Uber, SoftBank’s other Brobdingnagian investment ($7.6 billion), recently went public to disappointing results. SoftBank is now more than $600 million underwater on its ride-sharing investment.

Its investment in Inactivity has fared better: The firm invested around $335 million in Slack from 2017 to 2018 at between $8.70 and $11.91 a share in. As of Friday’s close, its stake was worth just over $1 billion. Even so, the value of this stake has declined all but 30% since Slack’s debut, and shares tumbled 8.8% on Friday to $27.38, the lowest since the company’s sell debut in June and barely above the debut “reference price” of $26.

SoftBank may still be proven pure.

Some of today’s tech giants, like Amazon and Netflix, have historically gotten long leashes from popular investors, who watched them lose money for years while proving out their business models. maybe this is well-deserved a moment in time, and Uber, Slack and WeWork will all be phenomenal success stories in the years to come. It’s also honestly that Uber, Slack and WeWork are a small sample of all the companies SoftBank has invested in, and are only in the infancy of their free valuations (or, in the case of WeWork, pre-infancy).

Even so, there’s an inherent clash of objectives between investing in technology infrastructure that require change the world and delivering more instant gratification to shareholders. It’s part of the reason why Tesla CEO Elon Musk evaluated about going private, even though the public markets had actually supported Tesla’s stock fairly good during last year’s tweet scandal. Twitter has been a life-altering invention, but until very recently, its market had languished for years.

This tension is amplified when the companies in question need billions in capital to achieve the competitive moat Son shortages. Simply put, companies get a lot more rope when they’re not public..

It will be interesting to see if Son puts future large Phantasm Fund stakes (including Vision Fund 2) in companies that aren’t as close to going public as Uber, Downturn and WeWork. If the fund decides to move slightly earlier stage, it may not have as much clarity on picking the dominant prizewinners it’s searching for — but it might have more of a valuation cushion. SoftBank may also be able to satisfy some investors by retail shares in secondary private markets, as it did when it accumulated its stake in Uber, rather than risk a lower portion publicly valuation.

It’s also possible SoftBank will start pushing harder on its investments to stay private until they’re virtually sure to hit certain valuation targets. Perhaps Son will not push quite as hard on growth-at-all-costs if that growth requests capital that only SoftBank is willing to provide.

Investing in dominant technology companies has clearly been magnitude the best investment strategies of the past two decades. But most of those dominant technology companies haven’t been capital-intensive companies with involved financial obligations, such as WeWork and Uber. Perhaps Son’s change will be a movement away from infrastructure will-powers — the types of companies that may do the most to change the world — and more toward products that ride on that infrastructure.

That would be a variation in the vision and probably worse for societal progress. But it may be better for investors’ pocketbooks, including the most important investor — Masayoshi Son.

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