SoftBank CEO condemns Khashoggi's assassination, says firm to maintain ties with Saudi Arabia
SoftBank CEO condemns Khashoggi's assassination, says firm to maintain ties with Saudi Arabia
He denounced the murder of Saudi journalist Jamal Khashoggi, but said that it would not affect his company's current ties with the kingdom, which helps finance its largest technology investment fund in the world.
The assassination of Mr. Khashoggi last month has increased the political risks for
which operates the Vision Fund, backed by a commitment of $ 45 billion from Saudi Arabia. The fund has been assuming greater financial risk, adding debt to an already leveraged structure to pursue holdings in the world's largest companies, such as the provider of office space WeWork Cos.
Grisly's details about Mr. Khashoggi's assassination at the Saudi Arabian consulate in Istanbul prompted many Silicon Valley companies, including some that have received investments from SoftBank or its Vision Fund, to cancel their commitments to speak at a conference in Riyadh last month sponsored by the Saudi sovereign wealth fund.
SoftBank Chief Executive Masayoshi Son said he canceled his appearance on the conference stage, but met with Crown Prince Mohammed bin Salman and raised concerns.
"This was a tragic incident that should not have happened," said Mr. Son, who also controls
Sprint
Corp.
, at a press conference on SoftBank's quarterly earnings on Monday. "I sincerely hope that the truth is revealed soon and that we are given an adequate explanation."
Mr. Son said that having received an investment from the Saudi people, SoftBank had an obligation to help Saudi Arabia diversify its economy. He did not rule out possible future investments by the kingdom, and said he would take into account the findings of the murder investigation.
The Saudi government has denied that Prince Mohammed had direct knowledge of the kingdom against Mr. Khashoggi, despite lingering suspicions by Turkish and Western officials that he should have known. The prince has condemned the murder as a "horrible incident".
It has provoked a deep search in Silicon Valley, where Saudi Arabia is the largest source of financing for new companies. So far, not many have rejected the money from the Vision Fund, Son said, although he said that "there may be a small impact."
The risk of the bonds of the Vision Fund with the Saudis occurs when the fund is acquiring more debts to improve profitability.
SoftBank Vision Fund and its subsidiary Delta Fund total capital of $ 98 billion. They are using it to pursue investments in some of the most valuable technology companies in the world. SoftBank has also invested in Uber Technologies Inc., a pioneer in travel management, and plans to transfer participation to the Vision Fund.
About 60% of the money pledged to the Vision Fund by investors other than SoftBank takes the form of securities similar to debt that obtain a fixed annual yield of 7%. That is an unusual structure for a fund that supports young and unprofitable companies, where it is not clear when, or if, investors will make money.
In addition to that, Vision Fund and its subsidiary have been borrowing money: they had around ¥ 636 billion ($ 5.6 billion) in debt at the end of September, up 28% in the last six months, according to the statements of SoftBank. That money has been in part to pay the promised returns to investors of the funds, the documents say.
The representatives of Saudi Arabia, Turkey and the United States have disagreed with what happened to the missing journalist Jamal Khashoggi, until Saudi Arabia confirmed that he was assassinated at his consulate in Istanbul. Here is how the narrative of each country developed. Photo: George Downs / The Wall Street Journal
And SoftBank is planning for the Vision Fund to borrow approximately $ 9 billion or more to further boost the fund's returns and make more investments, Son told The Wall Street Journal after the press conference.
Those returns have already been stellar, Mr. Son said at the press conference, pointing to a graph that showed that SoftBank's operating profits rose 62% to ¥ 1.4 trillion during the first half of the fiscal year from the previous year, in much due to the income of the fund of the vision.
SoftBank recorded an operating profit of ¥ 632 billion from the Vision Fund in the six months ended September 30, more than triple the previous year, thanks to the sale of its stake in Indian e-commerce company Flipkart for
Walmart
Inc.,
as well as valuation increases in companies such as the chip manufacturer.
Nvidia
Corp.
and the Indian company of cheap hotel reservations OYO.
The total debt at SoftBank, whose bonds were given a scrap level rating by credit rating companies, was close to 18 trillion yen as of September 30, compared to 3.2 trillion in cash. and cash equivalents. A large part of the debt is linked to the Sprint and SoftBank business in Japan as a provider of cell phone services.
"Next year, our results will far surpass this year's, and we may have a level of operating profit never before seen in Japan," Son said.
Write to Mayumi Negishi in mayumi.negishi@wsj.com and Phred Dvorak in phred.dvorak@wsj.com
.
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