SoftBank Stock Soars 20% as OpenAI Valuation Doubles to $500 Billion

SoftBank Group's stock price reached a new high of 14,825 yen on Tuesday, with the company's market value hitting 14.6 trillion yen. This surge was driven by the significant increase in the valuation of OpenAI, a company in which SoftBank has invested heavily. Despite the second Vision Fund facing a loss of 22 billion dollars, the rise in OpenAI's valuation has helped SoftBank's stock price rebound, showcasing the company's ability to navigate through crises.

The investment in OpenAI has proven to be a strategic move, as the company's technology and potential have attracted substantial interest from investors. This has not only boosted SoftBank's market value but also reinforced the confidence of investors in the company's leadership and vision. The success of OpenAI is a testament to the potential of artificial intelligence and its transformative impact on various industries.

On August 12, it was reported that OpenAI was in discussions with investors, including Thrive Capital, to sell employee stock options. The company's valuation reached 500 billion dollars, doubling from its previous valuation. This significant increase in valuation has nearly doubled the value of SoftBank's 9.7 billion dollar investment in OpenAI, which is crucial for offsetting the 22 billion dollar cumulative investment loss of the second Vision Fund.

However, the second Vision Fund has faced substantial challenges. Since its launch in 2019, the fund has incurred a cumulative loss of 22 billion dollars across 280 different companies, amounting to nearly a third of its invested capital. The investment in OpenAI is seen as a potential turning point for the fund. SoftBank's investment strategy in OpenAI involves high leverage, with the second Vision Fund borrowing tens of billions of dollars from SoftBank itself and Japanese banks, as well as private lending institutions like Apollo.

SoftBank is expected to invest an additional 22.5 billion dollars in OpenAI by the end of this year, based on a valuation of 260 billion dollars. If this transaction is completed, SoftBank could hold up to 12% of OpenAI's shares. This investment could potentially be profitable for SoftBank before the funds are fully invested, provided OpenAI successfully transitions to a profitable structure.

The future allocation of these 22.5 billion dollars is still uncertain, as it remains to be decided whether it will be placed in the second Vision Fund or SoftBank's balance sheet. This decision will directly impact the returns for SoftBank's shareholders and the individual. The second Vision Fund, unlike the first, does not have external investors. The individual holds 17.25% of the fund's shares, deeply linking their personal wealth to the fund's performance.

This arrangement has raised concerns about corporate governance, as it potentially reduces the returns for SoftBank's shareholders from the OpenAI investment. The high concentration of risk in this investment also brings to mind the previous failure in investing in WeWork. Despite these concerns, the current trajectory of the investment in OpenAI appears to be leading to a significant victory. However, as with any high-risk investment, there is always the possibility of a similar tragic outcome.