Back in July, the Japan-based telecom giant acquired British semiconductor designer ARM Holdings for $32 billion in a sale that infurated its shareholders because of the proportion of debt it would incur from the company. The other reason was because of valuation concerns during a time of economic uncertainty following the UK’s referendum to withdraw from the EU.
During the sale, SoftBank made several pledges to keep ARM’s headquarters in Cambridge and to double the number of employees over the next five years, while UK Prime Minister Theresa May said the deal was in her country’s national interest.
Then in October, SoftBank cofounder and entrepreneur Masayoshi Son announced the creation of a new SoftBank Vision Fund, in partnership with the Public Investment Fund of Saudi Arabia, that is intended to make “attractive long-term investments” in the technology sector globally. SoftBank’s initial investment in the non-binding fund starts with at least $25 billion over the next five years while PIFs starts at $45 billion, though the potential size can go up to $100 billion.
25 to 50 percent of Vision Fund to be invested in US tech startups
Now, SoftBank has agreed to sell a 25 percent stake of ARM to the Vision Fund, or about $8 billion. While this is a fraction of the total $100 billion size of the collaboration between the two groups, the ARM sale is indicative of the types of technology companies that SoftBank and the Saudis are willing to finance.
However, it appears that Son has already discovered a large pool of talent where at least half of the funds can be invested over the next five years. In January, he met with US President Trump with an agreement to invest $50 billion in US tech companies to spawn the growth of at least 50,000 new jobs.
So while the British government received a large influx of positive investment expectations following the ARM sale in the wake of Brexit uncertainty, the US technology sector in Silicon Valley now appears to be getting the same in the wake of a Trump presidency.
However, the amount that Son is pledging to the US is a bit high, according to bankers advising the Vision Fund. They say that more than three quarters of the fund’s resources will be directed toward larger investments in private and public markets, rather than into startups. Smaller contributions from Apple, Lawrence Ellison at Oracle, and others suggest several smaller venture capital investments into artificial intelligence, robotics and financial technology, though most will be placed into larger companies.
A team of portfolio managers are currently working to get the investment process started, with SoftBank executives having final say. A smaller group of former Deutsche Bank employees will also take on a major role in putting the investment money into proper circulation.