SoftBank's Commitment of $100 Billion Towards Trump Exceeds its Entire Stock Market Value
SoftBank's Commitment of $100 Billion Towards Trump Exceeds its Entire Stock Market Value
On a Monday, SoftBank Group CEO Masayoshi Son and President-elect Donald Trump declared a daring vow: The Japanese tech giant plans to pour $100 billion into American projects during the next four years. This was a significant declaration from a global tech colossus, joining forces with the incoming president, vowing to generate at least 100,000 fresh jobs in AI and other emerging tech domains.
This bold proclamation surpassed a related one Son made back in 2016 as Trump's presidency commenced—a $50 billion promise and 50,000 jobs. During a press conference at Mar-a-Lago, Trump's private residence in Palm Beach, Florida, Son remarked, "President Trump is a double-down president." "I'm going to have to double down.", said Son.
However, there's a catch: SoftBank isn't currently in possession of a $100 billion fortune. At the market close on Monday, the company's entire market cap was estimated at $97 billion, with $29 billion in cash reserves. The way to fund this pledge remains unclear, and Son didn't address this issue during the announcement.
This dedication spans over the duration of Trump's presidency, giving SoftBank ample time to uphold its commitment. The company did indeed meet its 2016 pledge, investing in numerous firms like Slack and DoorDash. However, it's challenging to quantify the creation of these 50,000 jobs, and the company didn't provide such data at the conclusion of Trump's tenure.
SoftBank remained silent in response to our request for comment.
SoftBank's most valuable asset is its 90% stake in Arm Holdings, a British semiconductor giant that went public recently. Arm's market cap currently stands at $152.6 billion, and SoftBank's stake is worth around $137.3 billion. If this stake was liquidated, it would more than cover the company's commitment. While it's unlikely that SoftBank would sell its entire stake, it could potentially use this stock as collateral to take out loans that could finance the commitment. However, SoftBank has already taken out $8 billion in margin loans against its Arm stock.
SoftBank's announcement coincides with several tech executives trying to gain Trump's favor as he regains power. In the past few days, Facebook's parent Meta, Amazon, and OpenAI have reportedly promised to donate $1 million each to Trump's inauguration fund. Key supporters like Tesla CEO Elon Musk and venture capitalist Marc Andreessen have played a different role than they did during Trump's initial tenure. Meta's Mark Zuckerberg recently visited Mar-a-Lago, and Google CEO Sundar Pichai is said to be planning a visit.
SoftBank is most renowned for its Vision Fund, a $100 billion venture fund it announced in 2017 for investing in tech ventures worldwide, with half the funds originating from the sovereign wealth funds of Middle East nations such as Saudi Arabia and the United Arab Emirates. However, the Vision Fund gained notoriety for misjudged investments, such as the disastrous coworking real estate company WeWork, and SoftBank posted an $18 billion loss. In 2020, the activist investor Elliott Management bought a $2.5 billion stake in the Vision Fund and pressed for reform and transparency. With obstacles in front of it when attempting to raise funds for a Vision Fund 2, Softbank found it hard to entice investors due to the first fund's issues.
In the pursuit of the $100 billion milestone, the company might include already-announced commitments in its total. For instance, Softbank reportedly invested another $1.5 billion in OpenAI last month through an employee tender offer. In May, the Japanese firm declared it would commit $9 billion annually to AI investments, although it didn't specify the precise companies it intended to finance.
Trump, who referred to Son as "one of the most accomplished business leaders of our time," didn't seem concerned about the availability of funds and even urged for more. "I've looked at their books, and they do have the potential of doing more." "I'm going to ask them to do a little bit more," Trump said on Monday. He even challenged Son to increase his commitment to $200 billion. While Son maintained a non-committal stance, he smiles and said, "I'll try to make it happen." "He's a great negotiator," Son added.
Additional reporting by Iain Martin.
Masayoshi Son, the CEO of SoftBank Group, mentioned during the press conference at Mar-a-Lago that President Trump is a "double-down president," implying SoftBank's intention to increase its investment commitment. SoftBank's most valuable asset, Arm Holdings, could potentially be used as collateral to secure loans, helping the company to fulfill its commitment.