U.S. investors may not be as familiar with Softbank (NASDAQOTH: SFTBY) compared with other headline-grabbing tech names, but they should be. Softbank, founded by the colorful Masayoshi Son (known as the "Bill Gates of Japan"), has grown from humble beginnings as a 1980s software distributor into a global tech conglomerate with a market capitalization of almost $80 billion.
Last year, the company launched the "Vision Fund", a massive $100 billion vehicle that will invest in technology companies all over the world. Just recently, the Vision Fund was reported by the Wall Street Journal to be strongly considering a $1 billion investment in Manbang, the "Uber of Trucking" in China and another notable tech "unicorn" (a private company valued over $1 billion). Here's what investors need to know about this potential deal.
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Softbank itself was built upon Son's big (and some would say, risky) acquisitions. The company's core Japanese telecom segment, its large minority stake in Yahoo Japan, an 85% ownership in Sprint, and the wholly owned ARM Holdings (acquired in 2016), were all the results of acquisitions. Of course, the company's greatest investment was its $20 million stake in Alibaba all the way back in 1999 -- now worth about $124 billion, even after some divestitures a couple years ago.
With the establishment of the Vision Fund, Son and company are now acting as a general partner for other investors, not just itself, as roughly $72 of the $100 billion Fund will be coming from outside limited partners.
These investors include huge players in tech, from Apple to Qualcomm and the Saudi Arabia Public Investment Fund.
The Vision Fund's mission is to make:
According to TechCrunch, the company has already spent some $35 billion, with high-profile investments in Uber and NVIDIA, and smaller investments in start-up companies such as dog-walking company Wag.
What could the next target be? As reported by the Journal, Softbank is looking to invest another $500 million to $1 billion in a company that could become the next key logistics player in China.
What makes Manbang so intriguing to Softbank? Well, the company clearly has an interest in ride-hailing platforms, as the Vision Fund is already an investor in Uber. However, Manbang is a much smaller company, but it also sits in the intriguing growth industry of Chinese logistics.
Manbang, which was created via the merger of two smaller companies last year, simply aims to match truck drivers with shippers looking to move cargo. According to the company's website, it already has four million truck drivers and one million exporters using its app. A potential investment from Softbank would value the company at $5 billion.
The investment marks a return of Son to China, the scene of his Alibaba win. Despite that jackpot, Son, who hails from Japan, hasn't been a big investor in China since, and this latest move comes as the China Investment Corporation, which is tasked with investing China's foreign currency reserves, may be looking to partner with or even invest in the Vision Fund.
That would give the CIC a way to participate in foreign tech industries, especially the U.S., where the Trump administration has made direct investment difficult, due to national security concerns.
A new world?
While the Manbang investment may seem like just another deal, it cuts across many of today's big tech themes -- China's growing economy (especially in e-commerce and logistics), U.S. and Chinese protectionism, and huge amounts of money flowing to private companies. All three are stories to follow, especially the Vision Fund and where it chooses to invest next.
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Billy Duberstein owns shares of Alibaba Group Holding Ltd., Apple, and Nvidia. His clients may own some of the companies mentioned. The Motley Fool owns shares of and recommends Apple and Nvidia. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.