Why is SoftBank struggling to fund its second Vision Fund?

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SoftBank Faces Challenges Securing Funding for Vision Fund 2

SoftBank Group is encountering significant difficulties in raising capital for its planned Vision Fund 2. This struggle stems primarily from the fallout of WeWork's failed initial public offering and a general decline in the valuations of several other key investments held by SoftBank. Despite the internal sentiment from some executives suggesting a delay, SoftBank founder and CEO Masayoshi Son remains committed to moving forward with Vision Fund 2, though it is now expected to be considerably smaller than the initially targeted US$108 billion.
Major Investors Have Not Committed Capital

A primary obstacle to the establishment of Vision Fund 2 is the lack of firm commitments from major external investors. As of recent reports, the only substantial pledge comes from SoftBank Group itself, amounting to US$38 billion. However, the viability of this pledge is also under scrutiny, given SoftBank's recent investment setbacks and the current state of its balance sheet. Many prominent potential investors, including technology firms like Apple and Microsoft, Japanese banks, and Standard Chartered, have not confirmed their participation or have only indicated willingness to contribute minimal amounts.
WeWork Debacle Damaged Investor Confidence and Valuations

The significant downturn in WeWork's valuation and the subsequent abandonment of its IPO have severely impacted Masayoshi Son's reputation as a shrewd investor. SoftBank and the first Vision Fund had collectively invested over US$10 billion in WeWork, valuing it at US$47 billion at one point. The recent re-evaluation, which placed its worth at approximately US$10-12 billion during the IPO attempt, signals a substantial writedown for the first Vision Fund. This event, alongside the poor market performance of other portfolio companies like Uber and Slack, has fostered skepticism about the valuations of other so-called "unicorn" startups.
SoftBank Faces Broader Financial Pressures

Beyond the specific issues with Vision Fund 2's fundraising, SoftBank itself is navigating a complex financial landscape. The company faces ongoing cash demands to meet the 7% annual interest payments owed to investors in the first Vision Fund, a structure that necessitates continuous liquidity. SoftBank has resorted to borrowing funds to facilitate these payouts. Furthermore, the potential blocking of its Sprint-T-Mobile merger by an antitrust lawsuit presents another significant financial risk. SoftBank's operating cash flow turned negative in the last quarter, and its stock has seen a notable decline, trading at its lowest point since January. As of June 30, while SoftBank held US$27.41 billion in cash and equivalents, these assets were largely offset by near-term liabilities, limiting its capacity to readily fund a new mega-fund.

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Why is SoftBank struggling to fund its second Vision Fund?

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