SoftBank Money Comes at High Cost

As SoftBank has been spraying money at tech companies in recent months, it has been negotiating unusually tough terms that sharply improve its chances of earning a big return, according to a review of previously undisclosed deal terms. In some cases, the terms allow SoftBank to assert control over many matters at the companies.

For instance, companies such as online lenders Kabbage and SoFi have given SoftBank the right to veto an IPO if the investor won’t earn a big return from the offering, Delaware filings show. The terms are aimed at reducing risk for SoftBank, which, through its $93 billion Vision Fund, has been paying exorbitant valuations in an array of tech investments in recent months.

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In some cases, SoftBank has to exercise rights with other investors. At Roivant Sciences, a drug development company in which it led a $1.1 billion round in August, SoftBank’s investment fund can partner with three other major shareholders to override certain board decisions, according to securities filings. A Roivant spokesperson said that provision was already in place in the company’s bylaws before SoftBank’s investment, and that it merely joined other shareholders in that right.

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Getting such control over companies amplifies SoftBank’s influence in tech, where it has lately become the biggest single investor across a variety of industries