The climax of the ‘risk’: Masayoshi Son mortgaged personal assets borrowed money from 19 different banks to continue investing despite the storm of Softbank blockade

Masayoshi Son, who built a $ 15.2 billion fortune by investing in tech startups like Alibaba, is becoming more reckless than ever, even when his Softbank empire is struggling. towel.

Specifically, the Softbank founder continued to mortgage 38% of his shares in the company for loans from 19 banks including Credit Suisse and Julius Baer. Thus, the number of shares in Softbank carried by Son’s billionaire has increased 36% compared to the beginning of the year and tripled compared to June 2013.

“It helps him to make money from a large part of his assets without affecting the company. However, there are certain risks. If the stock price falls low enough, he may be asking for more money or selling off the stock and that can be quite expensive. “

This structure shows Son’s greater expectations for Softbank and his $ 100 billion Vision Fund. This empire stock recently witnessed a slight shake due to the delay of the IPO of WeWork – a startup that Softbank has poured billions of dollars. The incident happened after this startup was greatly discounted by the market compared to the original $ 47 billion. That scared investors – as a result, Softbank shares fell 5% this week and blew Son’s $ 770 million in assets. For the whole year, the company’s stock is still up 27%.

Son, 62, also makes use of a stake in Vision Fund, a fund that invests in many tech startups. This could help his wealth increase if all goes well and vice versa, the losses will be enormous if the situation goes bad. Particularly, Uber’s market capitalization decreased along with WeWork’s difficult IPO process, causing Vision Fund to lose 62% of its initial investment.

“Companies are at great risk when their founders make important decisions without taking care of loans. When founders borrow too much money by mortgaging their shares, they have can be under pressure to make risky decisions, “ said Robert Pozen, a lecturer at the management school in Boston. He also shared that a mortgage of 5% of the shares to borrow is the most reasonable level.

Softbank’s pay plan is also very much related to debts. Son himself borrowed about $ 3 billion to invest in the first Vision Fund. Using loans for personal investments puts him at great risk because he will not be able to solve financial problems on his own once something bad has happened.

The loans will be exchanged for equity in the fund and it will make a profit when the agreement helps them to earn money and the opposite will cause loss of money. Vision Fund employees include well-known investors and bank employees who receive salaries and bonuses but are paid only when they are profitable.

It is not clear how much the salary will be when recorded in next year’s Softbank report. Son’s stake in bank mortgages is currently worth about $ 9 billion and is excluded from his net worth according to Bloomberg calculations. Softbank spokesman Hiroe Kotera declined to comment.

Softbank is currently planning to lend employees at least $ 20 billion to buy a stake in the second Vision Fund. Son alone can account for more than half of that.

Mortgaging equity is a new way for founders to take advantage of the value of their holdings without selling them. Larry Ellison once did so with the number of shares he had at Oracle to cater to his extravagant needs like acquiring real estate. About 27% of his stake in Oracle worth $ 16 billion is currently mortgaged. Elon Musk also pledged a 40% stake in Tesla.

The move is risky, and Tesla himself acknowledged that: “If the price of ordinary shares goes down, Musk could be forced to sell one of Tesla’s common shares by one or more banks to ensure the obligations of the account. If this is not possible, then any sale of such stock could cause the price of our common stock to decline in the future. “

For Son, who is known for his “high-dose” business philosophy that saw his fortune drop by $ 70 billion during the dotcom bubble, he didn’t feel afraid in this case. He told shareholders at a meeting in June that Softbank’s portfolio could grow 33 times to 200 trillion yen ($ 1.8 trillion) over 20 years.