SoftBank, the Japanese multinational telecommunications and Internet company, has been making big waves lately. Last week, it acquired an approximately $2.5 billion stake in Flipkart, India’s largest e-commerce company, founded in 2007. This has notable ramifications for a number of players in the tech world.
It provides a partial exit to some of Flipkart’s investors, including Tiger Global, a New York-based investment firm, which until now was the largest investor in Flipkart. SoftBank, which is a public company, is also buying shares of Flipkart from Accel Partners, IDG Ventures and Flipkart co-founders Sachin Bansal and Binny Bansal. (While they share the same last name, they are not related.)
“This is a monumental deal for Flipkart and India,” said both Bansals in a statement. “Very few economies globally attract such overwhelming interest from top-tier investors…SoftBank’s proven track record of partnering with transformative technology leaders has earned it the reputation of being a visionary investor.”
SoftBank’s $2.5 billion deal is not only a purchase of shares from stakeholders, but also an infusion of about $1.4 billion of cash into Flipkart, according to LiveMint news. This will enable Flipkart to expand and more aggressively thwart its biggest competitor, Amazon India. This investment puts SoftBank at direct odds with Amazon, a rival of more than a decade. To date, SoftBank’s most successful investment has been in Alibaba, the mammoth Chinese e-commerce site that effectively pushed Amazon out of China, the world’s biggest market. This deal is a setback to Amazon, which has been making strides with Amazon India.
SoftBank’s investment in Flipkart makes it the company’s largest stakeholder and expands SoftBank’s influence significantly in India.
“We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology,” said Masayoshi Son, SoftBank’s CEO. “As the pioneers in Indian e-commerce, Flipkart is doing that every day.”
That’s one of the world’s most influential investors talking. Son is not only the CEO of SoftBank, but also its founder. And he calls all the shots. Known as “Masa,” the 60 year-old billionaire, who created the company in 1981, is on a shopping spree. This year, Son created the SoftBank Vision Fund, a $100 billion investment fund that was used to invest in Flipkart. The SoftBank Vision Fund is a partnership with the Public Investment Fund of Saudi Arabia.
Some of Son’s past investments have been more lucrative than others. According to an article this year in The Economist, about 95% of SoftBank’s market value comes from its stake in Alibaba. Son invested in Alibaba back in 1999, the year it was founded. Its valuation is now roughly $393 billion.
More recently, in 2013, SoftBank (essentially, Son) acquired 70% of Sprint, the American telecommunications company, and it lost about $20 billion on that acquisition. But Son is unperturbed. Last year, he spent $31 billion on ARM Holdings, a British firm that designs chips in mobile devices. This latest investment in Flipkart is likely one of many more to come. So for successful tech companies looking for large investment – or a profitable exit – Son and his $100 billion SoftBank Vision Fund could be their dream come true.
By Todd Stone