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Technology M&A

Masayoshi Son and the faulty crystal ball

In fairy tales, a crystal ball can be many things: it can reveal the future, but it can also be a malevolent charm. The former rather than the latter is what Masayoshi Son had in mind in 2016 when, after paying $32bn to buy Arm — the most aggressive gamble of his life at the time — he described the UK chip designer as “my crystal ball”. 

As an investor obsessed for decades with the evolution of communications and software, the SoftBank founder had just bought a company through which he believed he could see the future of every trend in computing, artificial intelligence and the internet of things. 

The idea that he possessed magical insight became a formidable tool for one of Asia’s greatest salesmen. It was a pitch that allowed Mr Son to attract billions of dollars from Middle Eastern investors with the promise of betting on the start-ups that would dominate centuries into the future. 

Project Crystal Ball, after a quick rebranding, was introduced to the world later that year as the groundbreaking $100bn SoftBank Vision Fund — and its new Gulf backers demanded that a portion of Arm be put in the portfolio. 

But four years later, Mr Son’s crystal ball has yielded few results. Under SoftBank’s ownership, Arm failed to thrive. 

And the Vision Fund’s performance has been unremarkable. According to the fund’s own valuations, in November, its $75bn investment in 83 start-ups was worth $76.4bn. 

Meanwhile, other chip companies did much better than Arm. 

One of those, US-based Nvidia, was worth only $30bn when SoftBank acquired the UK company.  

But by the time Nvidia decided it was interested in acquiring Arm in the summer of 2020, its market value had surpassed $300bn. 

It’s not a done deal though. UK politicians are clamouring for commitments from Nvidia to keep some of Arm’s operations in Britain longer term. 

The transaction will also require clearance from places such as China, which may look to scupper the deal as part of its ongoing spat with the US over sensitive technology.

The sale of Arm has cemented Mr Son’s transition from an operator focused on the telecoms and tech industries to one who is a global manager of assets. And while Mr Son has not publicly discussed the sale of the chip designer, the chief executives of both Nvidia and the UK group have defended the deal as a continuation of his technology bet in the era of AI.

Ultimately, assessing scale rather than the type of business it has become may be more useful in defining SoftBank. Mr Son, says one SoftBank executive, will continue to run a company that defies easy description until it is of a size where it can straightforwardly be numbered among the 10 most valuable on the planet. Mr Son himself has been explicit about the link between market value and the company’s “significance to humanity”. 

When he was unveiling the company’s 30-year plan in 2011 and asking for the market to accept yet another reinvention of SoftBank, he stressed how critical market capitalisation was to that process. 

“In every age, the top 10 list includes companies that were the most needed by people at that time. In other words, these companies provided functions that were indispensable to everyone. This means that market capitalisation can be considered to be a standard global yardstick for gauging how much people need a company,” Mr Son said at the time, making his desire to enter the global top 10 an explicit target. 

Today SoftBank barely scrapes into the top 100. That is partly due to being listed on the Japanese market and also the discount at which its shares trade compared with the massive value of SoftBank’s assets. Yet, if Mr Son wants to know when and how the group can achieve his top 10 ambition, he may need to find a new crystal ball. 

See how Masayoshi Son’s crystal ball failed to live up to expectations with this video from Arash Massoudi, the FT's corporate finance and deals editor.  

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