[NEW YORK] The biggest backers of SoftBank Group Corp's gargantuan Vision Fund are reconsidering how much to commit to its next investment vehicle as an oversized bet on flexible workspace provider WeWork sours.
Saudi Arabia's Public Investment Fund (PIF), which contributed US$45 billion to the US$100 billion Vision Fund, is now only planning to reinvest profits from that vehicle into its successor, according to people familiar with the talks. Abu Dhabi's Mubadala Investment Co, which invested US$15 billion, is considering paring its future commitment to below US$10 billion, the people said, asking not to be identified in disclosing internal deliberations.
A partial retreat of the two anchor investors would complicate fundraising for SoftBank chief executive officer Masayoshi Son, who upended venture capital by making huge bets on promising yet unproven companies and spurring others to follow suit. Perhaps more than any other startup, WeWork has come to symbolise that brash style, and the success or failure of its IPO is likely to impact Mr Son's ability to raise cash for future deals.
PIF executives are still considering options and no final decision has been made, one of the people said. A spokesman for the Saudi Arabian wealth fund declined to comment. Mubadala said discussions are continuing on whether or not any investment will take place. A representative for SoftBank's Vision Fund didn't immediately have a comment.
"The suggestion we have made any decisions on the size or timing of a potential investment is simply unfounded," said Brian Lott, a spokesman for Abu Dhabi's sovereign fund. "Our discussions continue at an appropriate and deliberate pace, given the importance of this effort."
The Wall Street Journal previously reported that Saudi Arabia's sovereign wealth fund wasn't planning to be a significant investor in the new fund but may still make a more modest commitment. A decision to only reinvest proceeds from the first fund would mark a significant shift. Saudi Arabia's Crown Prince Mohammed bin Salman said last October that he planned to invest another US$45 billion into any new fund.
"We would not put, as PIF, another US$45 billion if we didn't see huge income in the first year with the first $45 billion," he said in an interview with Bloomberg.
WeWork is one of SoftBank's flagship investments, along with Uber Technologies Inc., messaging software provider Slack Technologies Inc and UK chipmaker ARM Holdings plc. SoftBank, which with its affiliates, owns a 29 per cent stake, and in January invested at a valuation of US$47 billion, more than triple the US$15 billion that's currently being discussed in an IPO.
Tensions have erupted within SoftBank over how it has handled its investment in WeWork. The Vision Fund, along with PIF and Mubadala, scuttled a US$16 billion investment early this year Mr Son had championed. SoftBank ended up making only a US$2 billion investment from its parent entity, rather than the Vision Fund.
SoftBank said in July that other investors had expressed interest in pledging a combined US$108 billion for the second Vision Fund, though that was before WeWork forged ahead with plans for an IPO. The new fund is expected to collect money from Apple Inc, Microsoft Corp, Foxconn Technology Group and various Japanese financial institutions, with seven having signed memoranda of understanding to participate.