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Opinion

SoftBank has a Tesla-sized decision to make

Even Masayoshi Son would struggle to raise the $146bn needed to go private

| Japan
It is Son's value-investment intuition that seems lacking now.   © Reuters

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

There is nothing like a 375% return on one market bet to help Masayoshi Son get past his epic stumbles of 2020.

U.S. food delivery app provider DoorDash's giant initial public offering sure came close, netting Son's SoftBank some $11.2 billion. It does not make Son's Vision Fund whole after his nearly $17 billion loss on WeWork and other wobbly startups. Last week's rally in SoftBank shares to 20-year highs suggests investors are giving Son the benefit of the doubt.

But Son's next gamble, his most audacious yet, may be doomed from the start: taking SoftBank private with a "slow burn" buyout. This idea has been bandied about at SoftBank headquarters for years. And it is worth noting that almost no one of importance there seems to think it is a good idea.

No such maneuver has been done by an operation with a market valuation anywhere close to $146 billion. How might even a master salesperson like Son raise that kind of cash? Might this distraction over the next 12 months squander much of that market capitalization? And if shareholders do not hold accountable a visionary who aspires to be, in his own words, the "crazy guy who bet on the future," who will?

Let us consider two possible motivating factors here: Son's disgust with investor sentiment and Elon Musk envy.

The first area of tension is well understood. The $100 billion Vision Fund that Son created in 2016 was his way of "walking the walk" to make the world a better place by investing in life-changing technologies. He had long "talked the talk" of a 300-year strategy horizon. It irks Son that something as trivial as short-term quarterly results have obscured that vision.

Son's humiliating stumble on WeWork gave investors valid reasons to question his judgment. After all, the work-sharing startup that Son touted as the next Alibaba seems more like the next Enron. On top of that colossal blunder, Son oversold the wonders of Uber, India's Oyo Hotels & Homes and other supposed game-changers.

The same goes for the ironic impatience of Mr. 300 Years. With Oyo and others, Son insisted on faster and faster growth, prodding the founders to take even more money than needed. That added burden -- plus pressure -- warps incentives, fosters undisciplined spending and breeds bad decision making that eventually boomerangs back Tokyo's way.

Ditto for Son's penchant for enabling dodgy management structures on the art of reckless founders. Here, Adam Neumann of WeWork infamy is Exhibit A.

Jack Ma is in the room, too, when Son indulges eccentric innovators. For 20 years now, Son has been dining out on the grand-slam home run he hit on Ma's Alibaba Group Holding. The Vision Fund was a ploy at doing it again, and to erase the mountain of debt he amassed since buying telecommunications companies and internet outfits.

Annoyed that investors notice the complexities and financial baggage from his journey, Son figures he can just take his bat and ball and go private. Just like Tesla founder Musk, the celebrity billionaire who arguably most feels Son's pain. Few short-sellers get out of Musk's Twitter feed alive. He, too, despises having to condescend to shareholders wondering what he is up to. And Musk, too, is in semi-constant flirtation mode with taking his operations private.

Tesla founder Elon Musk arguably most feels Son's pain.   © Sipa/AP

Musk, of course, faces a different challenge than Son: a market cap that is almost too big for comfort. One can argue Musk deserves greater regard from investors because his company creates game-changing vehicles and rockets. Son's juggernaut, with all due respect, largely relies on harnessing the inventions of others.

Son's DoorDash windfall comes at an ideal moment. SoftBank's 20% stake in the California-based food-delivery startup could raise Vision Fund profits. Still, Son has yet to articulate what is next for SoftBank, profit-wise. DoorDash, for example, seems a company that might not love how vaccines return consumer behavior back to some semblance of normalcy. Is there another 375% return on an IPO up Son's sleeve? It is always possible, but it seems fanciful at this point.

A DoorDash delivery person, pictured in New York City on Dec. 4: Son's DoorDash windfall comes at an ideal moment.   © Getty Images

One rationale for a "slow-motion" buyout is that it gives Son latitude to purchase SoftBank stock when it dips. To go private formally, Son's company might have to pay a hefty premium -- perhaps in the 25% range. The only thing going private would do is shield Son from intense public scrutiny, not the challenges of adapting to a fast-changing world.

This seems far more expensive than the most straightforward option: a coherent strategy to recalibrate the Vision Fund to underwrite a new wave of disrupters. In other words, relocate the 2000 version of Masayoshi Son, who had the wisdom to hand Ma, an unknown English teacher in Hangzhou, $20 million.

There was a certain audacity to that call. But it was Son's value-investment intuition -- his inner Warren Buffett -- that mattered most then and seems lacking now. These days, Son seems keener on quick hedge fund-like pops. His recent bets on major Nasdaq-listed tech companies like Amazon and Microsoft are just bizarre. Such monopolies stymie innovation and disruption.

It seems no coincidence that Son also grabbed a stake in Tesla, whose $594 billion market cap is nearly triple Toyota Motor's valuation. Fitting, considering Son faces a Tesla-sized decision about the fate of one of the globe's watched companies. There will be nothing private about this drama.

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