SoftBank doubles down on AI with $22.5 billion OpenAI investment approval

SoftBank has approved a second payment of approximately $22.5 billion to finalize its $30 billion investment in OpenAI, according to a report from tech news site The Information.

Sources close to the situation noted that the board of the Japanese conglomerate approved the payment on the condition that OpenAI complete a company reorganization, which will enable it to become a publicly traded company. 

SoftBank CEO Masayoshi Son had earlier said, “I think that OpenAI will be listed eventually and, in my belief, will become the most valuable company in the world,” Son said. Still, he noted that it “takes bravery to invest” in such a firm.

It appears Son has held this conviction for a while. In a recent shareholders’ meeting, he stated that before 2019, OpenAI CEO Sam Altman had approached him with a proposal for SoftBank to invest in the company.

He noted that he said yes because he had financial resources, thanks to the Vision Fund’s performance. However, Son said that Sam had spoken to other potential investors, and eventually, they chose Microsoft.

According to SoftBank, restructuring aims to simplify OpenAI’s governance model and align its operations with investor expectations for profitability and transparency.

SoftBank intensifies its investment amid global AI surge

Still, SoftBank cautioned that if OpenAI’s restructuring does not succeed, the total amount to be invested would drop to approximately $20 billion. 

Reports this month have also revealed that the Japanese company was involved in discussions about a $5 billion loan with international banks to boost its financial resources. This negotiation occurs when SoftBank’s CEO Masayoshi Son intensifies the company’s investment in AI.

According to sources with knowledge of the situation, SoftBank is close to finalizing an agreement with several lenders for a margin loan backed by its shares in Arm Holdings Plc., its chip division. This funding will support increased investment in OpenAI this year, according to sources who requested anonymity due to the confidential nature of the talks. 

Meanwhile, following these reports, SoftBank’s shares drastically declined by as much as 4.1% to 22,020 yen. This marked the largest decline since September 26, before gradually rebounding to finish down 3.1%, according to data from sources.

Additionally, following its maturity in 2032, its dollar bond declined by around 1 cent on the dollar to a value of 102.7, experiencing its biggest drop since it was issued in July. 

SoftBank aims to establish a second appearance on the overseas bond market

SoftBank is set to return to the overseas bond market for the second time this year, as it ramps up fundraising in artificial intelligence, with a primary focus on its investment in OpenAI.

To embrace this plan, the Japanese tech investment giant reportedly began selling $2 billion in dollar notes in two portions and €750 million (approximately $871 million) in euro-denominated notes, a source with knowledge of the matter said.

Since the source is prohibited from publicly speaking about the sales, remaining anonymous, the source hinted that the dollar notes will offer an 8.25% yield, and the euro bonds are expected to yield 6.5%.

This report has led to the analysis that Japanese firms have sold a record amount of overseas bonds this year, exceeding $100 billion, as they step up acquisitions, and higher yields on yen-denominated debt prompt caution in the local market.

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