President-elect Donald Trump on Tuesday emerged into the Trump Tower lobby with Masayoshi Son, the CEO of Japan’s second-largest telecom company, SoftBank, to make an announcement.
In front of the gathered reporters, Trump and Son said they’d struck a deal in which Son’s SoftBank would invest $50 billion in the US and bring 50,000 jobs to the country.
Trump followed it up by tweeting that the only reason Son decided to invest in the US was his election as president.
While the deal at first appeared to be a direct investment from SoftBank that would create American jobs, a deeper look shows there are still many unclear details and unanswered questions.
SoftBank Vision Fund
For starters, the $50 billion investment is not coming directly from SoftBank, but rather the SoftBank Vision Fund. The fund is a sort of investment arm of SoftBank, seeded with $25 billion of the company’s cash. The total value of the fund is around $100 billion, though that is not finalised and the fund is not yet closed, and it’s intended to invest in tech.
Son said in a speech Friday in New Delhi that $25 billion of the money was put up by SoftBank, $45 billion by the sovereign wealth fund of Saudi Arabia, and the remaining $30 billion by other investors, according to Bloomberg.
The fund, therefore, plans to invest half of what it has raised in the US. For comparison, a study of all 2015 venture capital funding in the world by EY found that roughly half of these investments were made in US-based companies, so this allocation does not appear to be out of the ordinary.
Additionally, Son has long been known to make large investments in the US, such as SoftBank buying 83% of mobile provider Sprint for over $20 billion. So it wouldn’t be out of his previous investment pattern.
The second half of the announcement details that the investment will bring 50,000 jobs to the US. It’s not clear if that’s going to companies that will then hire 50,000 people — or that it is going to companies that already employ 50,000 Americans.
While it is most likely the former, the vagueness of the news doesn’t provide much insight into how many people can expect jobs out of the venture or the time frame in which it would happen.
Nothing is official
During the impromptu press conference at Trump Tower, Son held up a PowerPoint slide that appeared to show details of the investment and bore the signature of Trump. This, however, does not mean any agreement has been formally made, according to people familiar with the matter, and no legally-binding contract has been signed.
Additionally, the announcement did not give any sort of timeline for the investment. The PowerPoint presentation appeared to suggest it would take place over the next four years, however. It also bore the Taiwanese multinational Foxconn’s logo and suggested another $7 billion would be invested over that period alongside the Vision Fund’s $50 billion.
Based on the information given by Son and Trump, however, it does not appear that this move is out of the blue or solely due to Trump’s win.
Of note, SoftBank, a hyper-acquisitive company, has faced resistance from regulatory agencies in the US before — most notably when Sprint was mulling a takeover of T-Mobile. So it may simply be engendering goodwill with the new administration.