US Startup Receives $140 Billion Investment
Market Cap Drops 7%
"No Impact on Our Financials," Rebuttal
As Silicon Valley Bank (SVB), which served as a financial lifeline for U.S. startups, declared bankruptcy, concerns are mounting over SoftBank, which has made large-scale investments in U.S. startups. The market is closely watching whether SoftBank, which has entered a phase of ultra-tight financial management due to losses in its Vision Fund, will begin asset sales to support its portfolio companies.
On the 13th (local time), Bloomberg reported that market concerns are intensifying that SoftBank, a major player in startup investments, will be impacted by the fallout from SVB's bankruptcy. SoftBank is known to have invested more than $140 billion in U.S. startups such as the office-sharing company WeWork and the online food delivery service DoorDash.
According to Bloomberg, as a result of SVB's bankruptcy, $5 billion, equivalent to 7% of SoftBank's market capitalization ($82 billion), has evaporated. The premium on the 5-year credit default swap (CDS), which indicates the possibility of default, also surged for two consecutive days.
Experts have assessed that although the U.S. government has taken measures to fully guarantee customer deposits to prevent this incident from escalating into a financial crisis, the contraction in investment sentiment is likely to negatively affect funding in the startup sector. Since startups rely on belief in long-term potential for growth, systemic issues such as funding problems can deal a significant blow to investments. Bloomberg explained, "It is still unclear how this incident will affect corporate funding, but there are also observations that other lending institutions could face crises."
Atul Goyal, an analyst at investment bank Jefferies, said, "Private equity and venture capital may face additional downward pressure on valuations in the private sector," adding, "SoftBank will likely have to write down its books sooner than initially expected." Consequently, some speculate that SoftBank might raise cash by selling its stake in Alibaba Group to support the companies it has invested in.
However, SoftBank has denied that SVB's bankruptcy will have a significant impact on its startup investments, citing that it only invests in companies with strong cash reserves. A SoftBank spokesperson stated, "This incident will not affect our financials," and added, "We believe SVB's failure will have little impact on the companies SoftBank has invested in."
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