SoftBank’s Son stockpiles $80bn for pandemic ‘worst case’

NEW YORK — As SoftBank Group shed assets ranging from Alibaba to T-Mobile this year, the Japanese tech investor created an $80 billion cash pile that CEO and Chairman Masayoshi Son says was built with the “worst-case scenario” of COVID-19 in mind.

“I saw the possibility of a lot of economic crisis,” Son said Tuesday as he kicked off the two-day New York Times DealBook Online Summit. “We have investment in many startup companies … I was afraid that, you know, maybe some of them cannot make it.”

SoftBank itself had enough money and assets, Son told Times journalist Andrew Ross Sorkin, but added, “I thought the cash is very important in this kind of crisis” in order to make moves when a new investment opportunity arises as well as to “protect” the group.

Despite recent vaccine and antibody treatment breakthroughs, Son is “pessimistic” in the short run about the coronavirus pandemic. “In the next two, three months, any disaster could happen,” he said. “So, you know, we’re just preparing for the worst-case scenario.”

Son said he set an internal liquidity goal for SoftBank Group at $41 billion early in the year. “We overachieved that target by almost” double, he said.

SoftBank raised $14 billion this year by pledging to hand over 10% of its shares in Chinese e-commerce king Alibaba Group Holding, and sold $20 billion worth of its stake in T-Mobile following the carrier’s long-awaited merger with Sprint. Son’s group also has reached a deal with American chipmaker Nvidia to sell U.K.-based peer Arm for $40 billion.

Son speaks via video at the New York Times DealBook Online Summit Tuesday.

The group is best known for its $100 billion Vision Fund and aggressive investments in tech startups ranging from American ride-share company Uber to Indian hotel chain Oyo. But SoftBank had reason to adjust its strategy even before risks of a pandemic emerged.

Following the high-profile collapse of Vision Fund portfolio company WeWork’s planned listing last fall, Son told investors in November 2019 that “my investment judgment was poor in many ways.”

At the virtual summit Tuesday, Son said he would rather “accept my stupidity” so as to “learn quickly, and I try not to make the same mistake.”

In a strategy rethink, Vision Fund has been writing smaller checks this year in hopes of bigger returns. SoftBank also has quietly built up stakes in more established  publicly traded American tech companies including Amazon and Netflix.

And though recent setbacks have called into doubt Son’s thesis of investing for the next 300 years, the entrepreneur remains bullish on artificial intelligence.

Asked how he intends to use the $80 billion, Son said “if we can invest in these AI … front-end companies, if we can invest more into those opportunities, I will be aggressive.” An economic downturn would provide a better price to buy in, he said, as startups might have a harder time fundraising.

“Of course, if our share price dropped down, I want to buy back our own shares,” he said, because “I’m a believer of our own company.”

The prolific tech investor also offered his take on the security concerns, raised by Washington, surrounding Chinese companies such as Huawei Technologies and TikTok. SoftBank owns a stake in ByteDance, the parent of the video-sharing app.

“I don’t think there was an actual risk that much,” Son said. “If there is any concern, specifically there should be a discussion of how to mitigate that. And there’s always a technical solution without making it too much political.”

“It’s a sad thing if some service that people enjoy a lot [is] discontinued because of some political concerns of something that’s actually not happening,” he said.

Son said Zhang Yiming, the founder and CEO of ByteDance, “has no intention” of eroding the privacy or security of citizens from the U.S. and other countries. He just wants to “provide a good, fun and enjoyable thing” with TikTok, Son said.

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UK trade department faces race to get £80bn of trade agreements ratified

Liz Truss’s Department for International Trade (DIT) is scrambling to meet a Wednesday deadline for tabling £80bn of trade agreements before parliament, in time for them to come into force in January under standard procedures.

Truss’s department has signed a string of “continuity agreements” to ensure the UK can go on trading with non-EU countries on similar terms, when the Brexit transition period comes to an end on 31 December.

Under the Constitutional Reform and Governance Act (Crag) passed in 2010, international treaties have to be laid before parliament for 21 sitting days before they can be ratified.

With parliament due to rise for Christmas on 17 December, as of this Thursday only 21 sitting days remain before the new year.

DIT published parliamentary reports on two deals, with Ukraine and Ivory Coast, on Monday, and details of the Japan deal struck in September have also already been published for MPs to scrutinise. But talks are not yet completed with 15 countries, including Canada, Turkey and Singapore.

The shadow trade secretary, Emily Thornberry, has written to Truss, urging her to explain the delay, and demanding she update parliament on the process. In the letter, Thornberry said that during 2019 there was “clear momentum behind this process”, with 20 continuity agreements made.

“However, as your department’s focus switched in 2020 to the talks on potential new free trade agreements with the United States, Australia, New Zealand and the [comprehensive and progressive agreement for trans-Pacific partnership] CPTPP, as well as an enhanced continuity agreement with Japan, last year’s momentum appeared to die out,” Thornberry said.

“Not a single additional continuity agreement was secured in the first eight months of 2020, and in their correspondence with the shadow international trade team, representatives of countries ranging from Cameroon to Montenegro have reported that no formal talks were even conducted in that period.”

Thornberry said that while Truss had promised agreements would be shared confidentially with the Commons international trade committee, this had not happened for in-progress deals with Ukraine, Ivory Coast and Kenya, and would be now impossible with the 15 outstanding examples.

“What makes this abysmal and shambolic state of affairs all the worse is that when we look at the length of time your department has had to get these agreements in place, ensure proper parliamentary scrutiny, and protect our continued free trade, it has been so totally avoidable,” the letter said.

“In many cases, your department has had more than four years since the Brexit referendum to secure the 15 outstanding continuity agreements.”

Without a continuity agreement in place, trade with these countries would revert to less favourable World Trade Organization terms.

However, DIT argues that it is not uncommon for countries to use a provisional application, meaning a renewed trade deal would come into force before the 21-day period begins or is completed.

But Thornberry’s letter argues that it would be “very regrettable” to do this, or to use an “exceptional cases” provision under the Crag law: “Those provisions exist to cater for unusual circumstances, not to cover for entirely avoidable incompetence.”

The DIT said: “We are considering all possible options to maintain continuity of existing trade terms and will look to sign further agreements in the coming weeks.

“We are working with our partners to ensure that signed continuity agreements with all 52 partner countries are able to enter into force after the end of the transition period.”

Its spokesperson added: “It is misleading to say there’s a hard deadline on this,” claiming Truss had not promised to share deals with the committee 10 days in advance of laying them before parliament.

Truss told the House of Commons last month: “We will always endeavour to make sure the committees have at least 10 sitting days to read through these on a confidential basis, as we are doing for this deal.”

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