October 15, 2018 / 6:26 AM / 10 months ago

Breakingviews - Riyadh is clouding Masayoshi Son's $100 bln vision

SoftBank Group Corp. Chairman and CEO Masayoshi Son speaks during an earnings briefing in Tokyo, Japan, July 28, 2016. REUTERS/Kim Kyung-Hoon

HONG KONG (Reuters Breakingviews) - Riyadh’s problems are spilling over into tech. Fallout from the disappearance of prominent Saudi journalist Jamal Khashoggi has hit Japan’s SoftBank, whose $100 billion new economy war chest is backed by the Kingdom. Masayoshi Son’s investors are rattled. Certainly, entrepreneurs like Uber’s Dara Khosrowshahi will be wary of accepting fresh Vision Fund investments. New capital will be harder to come by too.

On Monday, investors erased nearly $8 billion in market value from Son’s Japanese conglomerate. Hours earlier, JPMorgan announced chief Jamie Dimon had bowed out of a high-profile Saudi investor conference to be held later this month. Dimon is the latest executive to scrap plans to attend “Davos in the Desert”, following the alleged assassination of the Washington Post columnist, who was critical of the regime. Saudi officials deny any wrongdoing.

Whatever happened, Son’s deep ties to Riyadh are a cause for concern. The Vision Fund has been touted as a vehicle to realise the Japanese maverick’s cutting-edge ambitions. But Crown Prince Mohammed bin Salman, known as MBS, looms just as large over the project. His Saudi Public Investment Fund (PIF) committed $45 billion in capital, making him the largest and most important backer. As he put it in an interview this month, “without the PIF, there will be no SoftBank Vision Fund”.   

MBS was portrayed as a youthful champion of reform. That is now far less clear. Instead, an uncomfortable level of dependence will leave unicorns in Silicon Valley and beyond thinking twice. Just days ago, Richard Branson called off talks with PIF over a $1 billion investment into his Virgin space companies; the New York Times on Oct. 14 reported that U.S. entertainment holding company Endeavor was reassessing a separate $400 million injection. Office-sharing outfit WeWork’s Adam Neumann, whom the Wall Street Journal says is mulling a potential $20 billion infusion from the Vision Fund, could follow suit. SoftBank’s Saudi dream is unravelling.


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