How Masayoshi Son’s ‘Money Guy’ went from hero to zero

SoftBank had invested $ 1.5 billion in Greensill’s eponymous financial firm, but in a meeting with Indonesian President Joko Widodo, Son introduced Greensill as the “money guy,” according to TV footage. local.

A year later, the money guy has become a money pit. Greensill Capital collapsed in March in one of the most spectacular financial explosions in recent years, sending shockwaves through a Swiss banking giant, two of Japan’s largest corporations and a tycoon’s industrial empire. British.

Masayoshi Son, Chairman and CEO of SoftBank Group Corp., speaks at a press conference in Tokyo, Japan on Wednesday, February 12, 2020. As a sign of continued struggle with its startup investments, SoftBank has again lost money in its Vision Funds, a quarter after the Japanese company posted a record quarterly loss due to the WeWork collapse.

Son had to write off his investment, making it one of the worst in the history of his Vision Fund, alongside the implosion of WeWork Cos., Another company in SoftBank’s portfolio. That probably won’t stop SoftBank from posting its best quarter on record, including more than $ 30 billion in profit at Vision Fund, thanks to the IPO of South Korean e-commerce company Coupang Inc. and a booming valuation of the Chinese start-up. Didi Chuxing Technology Co., according to people familiar with the matter. Nonetheless, the episode highlights the risks of Son’s strategy of taking large stakes in startups and then encouraging those portfolio companies to collaborate with each other.

Spokesmen for SoftBank in Tokyo and Greensill Capital in London declined to comment.

Son’s relationship with Greensill started off by chance: a junior executive at the Vision Fund sought an introduction, people familiar with the matter said. As of May 2019, SoftBank had invested $ 800 million in Greensill. It invested an additional $ 655 million in October.

Soon the two were talking to each other on a regular basis, even though SoftBank had invested in more than 80 startups and Greensill was far from the biggest, according to people close to the executives. Son presented Greensill at SoftBank events as an example of the cooperation he expected from companies in his portfolio, people said.

Greensill received the same star treatment as former WeWork CEO Adam Neumann before him and, most recently, Ritesh Agarwal, director of Oyo Hotels in India, who has since had to step down. A presentation at a 2019 SoftBank shareholders meeting featured photos of the three men, identifying them as artificial intelligence entrepreneurs in “the greatest revolution in human history.”

Greensill, in turn, drew attention, bragging about his conversations with the founder of SoftBank, his company executives said.

“One of the perks of joining the SoftBank Vision Fund family hasn’t just been the network, the capital and the advice, it’s actually having Masa as a partner and mentor,” Greensill said in a document now. deleted. “He worked with us, and in particular with me, to think about our core business and how we can really take that core business and tackle other inequalities and other challenges that exist in the global market. “

Greensill was a key part of what Son dubbed his “Cluster of No. 1” strategy, taking uncontrolled stakes in the world’s biggest tech companies and encouraging them to cooperate. In theory, startups would operate WeWork’s network of coworking spaces or use drivers from Uber Technologies Inc. for deliveries. Greensill’s role was to provide struggling SoftBank startups with easy access to financing without having to pledge heavy collateral.

Former Morgan Stanley banker Greensill, 44, founded his company in 2011, focusing on extending short-term loans backed by bills. But some of the funding provided to SoftBank’s companies was based on expected future sales, not actual invoices, people familiar with the practice said.

The loans, securitized and turned into bond-like instruments known as notes, have been presented to some investors as collateralized by transactions, according to marketing materials and people familiar with the matter. Investors thought they had short-term debt, the people said.

Most of the loans were made through Credit Suisse Group AG’s supply chain funds that attracted $ 10 billion from investors. Among the borrowers were portfolio companies SoftBank Oyo, mobile software company Fair Financial Corp. and the modular construction start-up Katerra Inc.

SoftBank was also an investor in Credit Suisse funds, which led to conflict of interest accusations against the Japanese company. This sparked an internal review by the Swiss bank and SoftBank withdrew $ 700 million from the funds.

“Having a company within Vision Fund that makes it easy for startups to get cash is maybe not a good idea,” Kirk Boodry, analyst at Redex Research in Tokyo, told Bloomberg News. , and you don’t know if you’re doing it right. “He called the Greensill loans an example of negative synergies.

“In the end, whatever positive synergies they get, they are likely to be irrelevant,” he said. “But the negative will come back to haunt them.”

It was in search of such synergies that Son had proposed to invest in the new capital of Indonesia on the island of Borneo and in a new city that Crown Prince Mohammed bin Salman built on the Saudi sea coast. Red. It was Son’s dream for portfolio companies such as Katerra, Oyo, car transport startups Ola and Grab, and facial recognition company SenseTime Group to win contracts. Greensill would help provide funding.

Greensill’s name has continued to appear in Vision Fund meetings and presentations, according to people familiar with the matter. When managing partners questioned investment ideas presented by transaction teams, questions often focused on liquidity, a common issue for startups. These discussions often led to Greensill, the people said.

But in March 2020, a month after the trip to Indonesia, Son and Greensill’s relationship started to deteriorate. The pandemic was shrinking supply chains, and investors pulled billions of dollars out of funds from Credit Suisse, Greensill’s largest funding source.

Greensill turned to Son for capital, saying he may have to call on the funding he provided to SoftBank’s portfolio companies, according to people familiar with the conversations. Suddenly, the weekly phone calls ended.

Colin Fan, the former CEO of Deutsche Bank AG who managed the investment for the Vision Fund, has stopped attending Greensill’s board meetings at the Savoy Hotel opposite his London office.

Fan needed to focus on other investments, according to someone familiar with the matter, and a spokesperson for the Vision Fund said other SoftBank representatives remained active and shared their concerns with Greensill management. But the two fund executives who continued to attend Greensill’s board meetings as observers mostly took notes and didn’t ask many questions, according to two people familiar with the matter.

This was the case even as Greensill’s problems escalated and one of its insurers, an Australian unit of Tokio Marine Holdings Inc., told the company it would not renew coverage on tickets sold at investors, including Credit Suisse.

In December 2020, as Greensill increasingly needed cash, SoftBank invested an additional $ 400 million in the finance company, in exchange for Katerra’s debt forgiveness, so that Greensill could repurchase notes in Credit Suisse funds. He also invested an additional $ 200 million in the construction business.

“After WeWork, SoftBank promised not to spend a lot of money after the bad, but here we are again,” said Boodry, the analyst. “They knew there were issues with Greensill, and they still put in more money. It’s almost like they accept the failure of these businesses personally.”

SoftBank held around 25% of Greensill at the end of last year, according to people familiar with the matter. He is now seeking $ 1.15 billion as a creditor to Greensill, who filed for insolvency in the UK on March 8.

Fan, who also managed the Vision Fund’s investments in Alibaba Local Services, Flexport Inc. and Fair, stepped down from his role as Managing Partner of The Vision Fund in January to become a senior advisor. The company did not give a reason.

Meanwhile, Credit Suisse is examining the role of board members, including CEO Thomas Gottstein, in its investigation into the relationship with the late lender. And, in Germany, regulators have asked prosecutors to examine how Bremen-based Greensill’s bank accounted for assets linked to British industrialist Sanjeev Gupta. Greensill said he sought advice from law firms before classifying his assets and complied with requests from German regulators.

As for Indonesia, Son has yet to keep its promise to invest in the new capital. He backed the merger of e-commerce provider Tokopedia, a portfolio company of SoftBank, with another Indonesian startup, cycling giant Gojek, which could potentially record a healthy profit.

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