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Text｜Zhengjieju

Influenced by the concept of AI, the market value of semiconductor design company ARM has risen to US$190 billion (approximately RMB 1.38 trillion).

The biggest beneficiary is Masayoshi Son, the former richest man in the world, whose SoftBank holds 90% of ARM's shares.

After suffering a loss of 130 billion yuan, Masayoshi Son has made a comeback this time.

01

When it comes to Masayoshi Son, Chinese people should be familiar with him.

This legendary figure in the international investment community invested in Yahoo in his early years. His net worth once exceeded 80 billion US dollars, surpassing Bill Gates and becoming the world's richest man for three days.

In 1999, Masayoshi Son invested US$60 million in Alibaba twice and received a return of RMB 200 billion.

Masayoshi Son became famous in China in one battle.

In 2016, Masayoshi Son announced that he was going to do something big and launch the first phase of SoftBank Vision Fund, planning to raise US$100 billion.

With such a brilliant record, many investors have responded, including well-known funds such as the Saudi Arabian Sovereign Wealth Fund, the Abu Dhabi Sovereign Wealth Fund, and technology companies such as Apple, Qualcomm, and Foxconn.

In a short period of time, SoftBank Vision Fund I successfully raised funds and became the largest private equity fund in the world.

At that time, the concept of sharing economy was very popular.

Masayoshi Son is behind popular companies in the sharing economy, such as Didi Chuxing, Uber, OYO, and WeWork.

This time, Masayoshi Son suffered a Waterloo.

WeWork is the originator of shared office space. Its valuation once reached as high as US$47 billion, and Masayoshi Son has high hopes for it to be the "next Alibaba."

In 2019, WeWork failed to go public due to huge losses, lax governance and other issues.

Two years later, WeWork finally successfully went public, but its market value has shrunk significantly from its peak in 2019.

In 2023, WeWork declared bankruptcy.

Masayoshi Son lost nearly $20 billion on the WeWork project and had to admit that his investment in WeWork was "stupid."

Uber's situation is slightly better than WeWork's.

The shared travel track that Uber is in is wider and more prosperous than WeWork, so its valuation is also higher, once exceeding US$120 billion.

However, after Uber went public, its stock price fell below the issue price on the first day, with a market value of US$51.9 billion, less than half of its valuation.

This investment also failed.

In addition, Masayoshi Son's investments in satellite network startup OneWeb, South Korean e-commerce giant Coupang, and Indian e-commerce giant Flipkart also suffered losses.

Statistics show that among the 88 companies invested by Masayoshi Son, 15 have gone bankrupt around 2020.

Dragged down by these projects, SoftBank Vision Fund lost US$20.5 billion and US$32 billion in 2021 and 2022, respectively.

SoftBank itself also lost US$10.5 billion and US$7.2 billion in 2021 and 2022, respectively.

In other words, in 2021 and 2022 alone, SoftBank, owned by Masayoshi Son, lost US$17.7 billion, or about RMB 130 billion.

02

Even the richest man cannot bear the loss of more than 130 billion.

In order to make up for the investment losses, Masayoshi Son sold his Alibaba shares and planned to sell ARM.

The "entanglement" between Masayoshi Son and ARM has been introduced in previous articles by Zhengjieju.

ARM is a British company that does not produce chips itself, but instead licenses its chip architecture to interested manufacturers.

To make an inaccurate analogy, ARM has developed a bunch of recipes, but it does not cook the dishes itself. Instead, it sells the recipes to manufacturers such as Qualcomm, MediaTek, and Huawei. The latter use the recipes to cook and make money, and ARM charges a corresponding fee.

This business model is called IP licensing model.

ARM is the world's largest chip IP supplier, with annual authorized chip shipments exceeding 20 billion, accounting for 99% of smartphones and 41% of the automotive industry.

Masayoshi Son launched the first phase of the Vision Fund, and in addition to the sharing economy, he also invested in AI companies.

In 2016, SoftBank acquired ARM, which was then listed on the London Stock Exchange, for US$31 billion.

This was the largest M&A transaction completed by an Asian company in the UK and caused a sensation.

Unexpectedly, in the second year after being acquired by SoftBank, ARM's net profit continued to decline.

In 2015, the profit was US$843 million, but by 2019, it was less than US$300 million.

Due to huge losses in other projects, Masayoshi Son was under great pressure and had no choice but to sell ARM.

In 2020, Masayoshi Son plans to sell ARM to Nvidia for US$40 billion.

However, the deal was rejected by antitrust regulators in countries and regions including the European Union, the United Kingdom, the United States, and China.

This delay, which lasted until 2022, actually allowed Masayoshi Son to make a turnaround.

In desperation, after receiving a "breakup fee" of US$1.25 billion from Nvidia, Masayoshi Son could only continue to push for ARM's independent listing.

At this time, the external environment changed again.

In 2023, AI big models exploded and artificial intelligence became a hot topic.

As Nvidia's market value soared, ARM also followed suit.

As we all know, the reason why Nvidia is so popular is because AI requires a large number of super chips.

As a semiconductor design company, ARM also has unique advantages in the field of artificial intelligence.

In fact, ARM has transformed from an IP provider to a computing platform company, providing complete and comprehensive computing solutions for the artificial intelligence industry.

To put it simply, Nvidia has become a giant with a market value of 3 trillion US dollars by "eating meat", and ARM still has a lot of room for imagination even if it just "drinks soup".

On September 15, 2023, ARM was listed on the Nasdaq Stock Exchange and closed up nearly 25%, with a market value of US$67.9 billion.

US$67.9 billion is not only significantly higher than the offer Nvidia made when it planned to purchase ARM in 2020, but also far higher than the price SoftBank paid for ARM in 2016.

In less than a year, ARM's market value has risen to US$190 billion (approximately RMB 1.38 trillion).

SoftBank, owned by Masayoshi Son, holds about 90% of ARM's shares.

ARM made a profit of over US$100 billion (approximately RMB 720 billion) from this investment, and Masayoshi Son completely turned his life around.

03

Investing involves risks, there are gains as well as losses.

But it is extremely rare to experience such ups and downs as Masayoshi Son's.

Looking at it from today's perspective, the track and company chosen by Masayoshi Son were not bad.

Why did this veteran in the investment world fall into the predicament of suffering a huge loss of more than 100 billion?

From a business model perspective, the Vision Fund initiated by Masayoshi Son is a business of buying low and selling high.

For example, investing in ARM, first acquiring it, then packaging it and listing it, and finally cashing out and making a fortune.

The key to the success or failure of an investment is often whether you can find a "buyer".

On the one hand, the "buyer" was scared away by Masayoshi Son.

With a huge fund of 100 billion US dollars in hand, Masayoshi Son's investment style is simple and crude. He directly throws money at big shots, which invisibly inflates the valuations of the invested companies.

The huge bubble makes the capital market hesitate.

Even Masayoshi Son himself admitted that his desire for money led to his successive investment failures.

On the other hand, Masayoshi Son is somewhat unlucky.

Shortly after Masayoshi Son made the investment, he encountered adverse effects such as the COVID-19 pandemic, global economic contraction and geopolitics.

Take OneWeb, in which it invested, for example. It claimed to be a rival to Musk’s "Starlink Project" and was sought after by the capital market, but was eventually crushed by the epidemic.

Unable to find a buyer in the short term, Masayoshi Son had no choice but to cut losses, resulting in a huge financial hole.

Fortunately, Masayoshi Son chose the right track of AI and was eventually able to turn things around.

Many people would say that it is fortunate that Masayoshi Son did not sell ARM to Nvidia.

Is the truth really like this?

At that time, if SoftBank sold ARM to Nvidia for US$40 billion, US$21 billion of the US$40 billion would be Nvidia shares.

Based on Nvidia's market value today, it is worth at least $300 billion.

That is to say, if Masayoshi Son sold ARM to Nvidia, the return would be at least US$300 billion.

What’s more interesting is that in 2019, Masayoshi Son sold 4.9% of his shares in Nvidia for US$4 billion.

If held until today, these shares would be worth $150 billion.

A difference of one thought can lead to a difference of billions.

Son Masayoshi's ups and downs in investment experience once again illustrate a fact:

Sometimes, choice is indeed more important than hard work.