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Five key questions for SoftBank Group’s shareholders meeting

Investor confidence put to test as Son readies next $100bn tech fund

SoftBank Group CEO Masayoshi Son plans to set up another $100 billion fund. (Photo by Yoichi Iwata)

TOKYO -- Wednesday will be a crucial day for Masayoshi Son, CEO of SoftBank Group, as thousands of shareholders gather in Tokyo for the company's 39th annual general shareholders meeting. Son will be looking to reassure the crowd that the conglomerate's transformation into a technology investment company is going smoothly, as he moves to set up another $100 billion fund.

Here are five key questions before Son makes his case.

What are the key proposals?

Shareholders will vote on the appointment of Yutaka Matsuo, a professor at the University of Tokyo, as an independent director. Matsuo is one of Japan's best known academics on artificial intelligence. He has no management experience, but SoftBank said it aims to tap his "high level of expertise."

The appointment reflects Son's focus on the nearly $100 billion Vision Fund, which pursues an investment strategy centered on companies that use AI to disrupt traditional industries. Matsuo would join a 12-member board that includes Vision Fund CEO Rajeev Misra, as well as high-profile executives from SoftBank's investments, like Alibaba Group Holding co-founder Jack Ma.

Shareholders will vote on the appointment of Yutaka Matsuo, a professor at the University of Tokyo, as an independent director. (Photo by Keiichiro Sato)

What can investors expect during the event?

Son has repeatedly pledged to narrow the gap between SoftBank's stock price and "shareholder value per share," a sum-of-the-parts calculation of the group's holdings. The former sits at roughly half of the latter, which is around 20,000 yen according to SoftBank.

Demonstrating that the Vision Fund can generate profits through successful exits could help.

While Son's presentation will be the center of attention, the event is also a rare opportunity to hear from well-known board members. At last year's gathering, Jack Ma said he and Son share many things in common, including a belief in the future. "Most people think we are crazy, but we don't think we are crazy," he said.

Where is the Vision Fund headed?

The Vision Fund is quickly becoming a core SoftBank business. It had 297 employees as of March, according to company documents, and Son recently boasted about its access to the best deals. "We are now in a position to negotiate an investment if we choose [a company] anywhere," he said.

But the lackluster stock market debut of U.S. ride-hailing app Uber Technologies, one of the Vision Fund's most talked-about investments, has raised concerns over the fund's ability to generate returns. Son said in early May that he wants to set up another $100 billion fund soon. Investors will be looking for clues on how he intends to achieve this.

Are investors happy?

SoftBank's stock price is up about 23% over the past year, and analysts point to two factors. One is that net profit for the year ended in March jumped 35.8% from the previous year, driven by valuation gains in the Vision Fund's portfolio companies.

Generous returns are the second factor: SoftBank launched a 600 billion yen stock buyback program, and essentially doubled its dividend by announcing a 1-for-2 stock split while keeping the same dividend per share.

Keeping shareholders happy will be crucial as Son ramps up executive compensation, which tends to be unpopular in Japan. SoftBank and its group companies reported payments of 9.1 billion yen ($83 million) to six executives, including 1.8 billion yen to Marcelo Claure, chairman of U.S. mobile carrier Sprint.

What happens next?

In another litmus test of the Vision Fund's performance, U.S. workplace messaging service Slack Technologies plans to list its shares on the New York Stock Exchange on Thursday. Slack's filings show the Vision Fund invested $135 million in late 2017 for $9.3 a share, and participated in some subsequent funding rounds. It is difficult to predict at what price Slack will begin trading, because it is skipping the conventional initial public offering process by listing its shares directly on an exchange.

The Vision Fund's reputation was dented when Uber shares tumbled in its IPO in May. A successful debut by Slack would help shore up confidence, but another weak showing would add to worries about potential exits down the road.

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