SoftBank reported earnings today, including the performance of its $98.6 billion Vision Fund. The numbers prompted by the recent departure of DoorDash, which has returned billions to Softbank and represents one of its first real blockbuster investments out of funding. The company has now seen 18 investment exits, 10 outright withdrawals and eight that are now trading in the public market.
Still, there was a note tapped deeply into the company’s earnings statement that the company cut the performance incentive halved from $5 billion to $2.5 billion to lead the Vision Fund.
That $5 billion stimulus project was controversial after it first published in April 2018 by publications such as the Financial Times. In the model, Softbank originally paid its employees to buy into the Vision Fund, a structure designed to accelerate the liquidation of the $100 billion funds. The company first added language about the incentive project to its 2018Q2 earnings:
On October 19, 2018, Softbank Vision Fund completed an interim liquidation with an additional committed $5 billion in committed capital. This brings the total committed capital of the fund to $96.7 billion. The additional pledged capital is for installing an incentive project to manage the Softbank Vision Fund.
Since then the company has consistently spoken about the $5 billion figure in its quarterly earnings report. However, in the case of the latest earnings for today’s fiscal year 2020Q3, the company noted that incentives are now “$2.5 billion (down from the previous $5.0 billion).”
The incentive project for Softbank has become a huge topic of discussion for industry observers. A report published by the Financial Times two weeks ago said that the top four executives of Softbank – Rajiv Misra, Marcelo Claire, Katsunori Sago and Ken Miyauchi- have given a combined $600 million to buy into the Vision Fund, according to a report in the Financial Times.
Softbank’s enthusiasm for the Vision Fund’s stimulus was apparently due to the overall declining performance of the fund and the response to the fund’s catastrophic investment in WeWork, which caused massive losses to the telecom group. Although the more recent performance for the fund has improved, the removal of some of those incentives should improve the overall performance of the fund and ultimately the bottom line of Softbank.
Like last year, Vision Fund has stopped investing in new companies. The second fund has a capital of $10 billion – all from Softbank – and continues to invest regularly. The Vision Fund also raised SPACs with two new companies announced late last week.