SoftBank’s Vision Fund is reportedly looking to borrow $4 billion in an effort to give some cash back to its investors.
Sources told The Financial Times that the $100 billion fund will borrow the money against its stakes in Uber, Guardant Health and Slack, and is already talking to banks, including Goldman Sachs, about the margin loan. Going this route will allow SoftBank to avoid “lock-up” periods that keep shareholders from selling stakes in newly-listed businesses.
The Vision Fund is the largest shareholder in Uber, owning a 13 percent stake in the ride-hailing company, which went public in May. It also owns a 30 percent stake in Guardant Health, a blood-testing company that went public last October and currently has a market capitalization of about $7 billion. Workplace messaging company Slack reportedly has plans to go public next month, with SoftBank’s stake recently valued at around $950 million in a private transaction.
While margin loans in the United States are required to have coverage of at least two times of the loan amount, the combined value of the stakes SoftBank’s Vision Fund is putting up should cover the loan more than three times over. The sources said the loan is set to be formally signed once Slack completes its direct listing.
This isn’t SoftBank’s first margin loan, or other form of borrowing, against its holdings. Last year, it took out an $8 billion loan against its stake in Chinese internet giant Alibaba.
A lawyer explained to FT that margin loans are the result of the recent boost in U.S. tech listings, with the loan used as a way for early investors to cash out some of their funds ahead of the lock-up periods.
“Shareholders are considering it more and more as either a way around lock-up, to put on more leverage or to maximize their proceeds,” a banker added.