Masayoshi Son pledged as much as 60 per cent of his shares in SoftBank as collateral against billions of dollars of personal loans in March, as the company’s plunging market value threatened to expose him to margin calls.
Mr Son pledged an additional 57m SoftBank shares to global banks including Credit Suisse, Daiwa, Nomura and Mizuho, as the coronavirus market turmoil exposed the SoftBank founder as one of the world’s most heavily leveraged businessmen.
Of the 462m shares in SoftBank directly controlled by Mr Son, the total he had pledged to lenders climbed to 280m as of March 19, according to an analysis of Japanese securities filings by the Financial Times. That increased the amount he had pledged to 60 per cent, from 48 per cent in June 2019.
One analyst said that the massive additional share pledge, which coincided with a phase of extreme volatility in SoftBank shares, raised questions over the extent of Mr Son’s personal borrowing against his shares and whether he and the company were now “symbiotically leveraged”.
SoftBank shares fell to a four-year low on March 19, taking the group’s market value to $51bn and making Mr Son’s direct holdings of about 22 per cent worth just over $11bn. In addition, Mr Son owns another 4.8 per cent through a series of asset management vehicles, having increased that position in recent weeks.
Efforts by analysts to infer the extent of Mr Son’s personal borrowing against SoftBank shares from the amount of additional stock pledged in March both by him and by the investment vehicles he controls suggest banks may have originally lent him around $4bn.
Those calculations assume that banks allowed him to borrow up to 70 per cent of the pledged shares’ value, on terms that would oblige Mr Son to take immediate action should a sudden drop in stock value cause the leverage to rise above 85 per cent.
The first regulatory filings relating to his share pledges appeared in June 2019 — shortly after SoftBank finally closed the first Vision Fund. According to people close to the company, the bulk of a $5bn investment into the Vision Fund by SoftBank employees came from Mr Son himself.
“Son putting money into the Vision Fund sent a reassuring message on the way up, but now it also means he is geared on the way down and investors may wonder how that will affect SB’s behaviour as a corporate,” said David Gibson, an analyst at Astris Advisory.
Mr Son’s personal borrowings against his stake are separate to the $55bn in net debt and $180bn of total consolidated debt at SoftBank, which investors cited as one reason why shares in the company fell considerably harder than its peers during the March sell-off.
Those declines prompted a series of emergency meetings, in which SoftBank explored a range of options to bolster its shares price including taking private the entire group led by Mr Son. SoftBank instead elected to pursue a $41bn asset sale programme to fund a giant share buyback and reduce its corporate indebtedness.
Shares in the group have recovered sharply since then, climbing 55 per cent and relieving pressure on the group. Its market value sits at $80bn as Thursday’s close in Tokyo.
People inside SoftBank say the asset sale is primarily designed to close the widening gap between the market capitalisation of the technology conglomerate and the value of its investments.
They deny any link to Mr Son’s personal interests or that he faced any margin call from his lenders, a roster of at least 18 institutions including Liechtenstein’s LGT Bank and Swiss private bank Lombard Odier.
In a period of just 10 days in March, Mr Son adjusted his pledged shares three times — following nine months of relative inactivity since last summer. The most recent filing on March 26 shows Mr Son reduced his pledged shares to banks by 26.9m.
SoftBank declined to comment on Mr Son’s personal holdings.
SoftBank Group itself has raised billions of dollars of margin loans secured on shares in its subsidiaries, most recently borrowing against its stake in its Japanese telecoms company in February. Rating agency Moody’s warned that this new margin loan added “leverage and complexity to [SoftBank’s] capital structure”.
The filings also show a complex web of personal asset management firms — ranging from Son Estate, Son Holdings to Son Corporation and Son Asset Management — the SoftBank boss uses to expand his financing options. At the height of the market turmoil on March 19, the total ratio of Mr Son’s pledged shares using all of his vehicles reached 72 per cent of 562m shares in SoftBank owned both directly and indirectly by the billionaire founder.
The FT excluded 30m of Mr Son’s shares pledged to a vehicle linked to his brother called Son Equities, whose purpose could not be immediately determined.