As FTX Melts, Analysts Race To Calculate SoftBank’s Exposure

(Bloomberg) -- How much will SoftBank Group Corp. lose on the spectacular meltdown of crypto exchange FTX.com?

Investors and analysts raced to answer that question Thursday after co-founder Sam Bankman-Fried warned that without a cash injection the company would need to file for bankruptcy. Sequoia Capital, one of FTX’s primary backers, swiftly put out a statement reassuring investors its exposure was limited and saying it wrote down the full value.

SoftBank and founder Masayoshi Son offered no such comfort, despite the company’s unfortunate track record with fiascoes like WeWork Inc. The company declined to comment on its exposure to FTX.

SoftBank hasn’t detailed how much money it put into FTX or where it valued the stake in recent quarters. SoftBank participated in a $900 million series B funding round last year and another $400 million this year, according to statements released by FTX. Multiple investors put down money in the two rounds, including Sequoia and Coinbase Ventures, and no breakdown was provided. 

Amir Anvarzadeh of Asymmetric Advisors, who has repeatedly advocated investors sell SoftBank shares short, reiterated his opinion in a research note. 

“This is yet another major blow to Softbank’s private investments,” said Anvarzadeh. He estimates SoftBank’s stake in FTX to have been worth billions of dollars. 

Mio Kato of LightStream Research estimates SoftBank’s exposure to FTX to be under $100 million in total. But the news is a reminder of how sharply such private valuations can fall in the current environment, he said.

The startup stakes SoftBank holds “could easily be down another 50-60-70%,” he said. 

Tiger Global Management, another aggressive investor in startups, has lost about 55% through October, while Ark Innovation ETF is down more than 60% year to date.

“It is not unthinkable for SoftBank Vision Fund’s private holdings’ underlying value to be similarly discounted,” Kato said.  

The average size of SoftBank’s Vision Fund 2 investments stood at about $100 million to $200 million as of June, compared with around $900 million for Vision Fund 1. 

Sequoia said in its statement it had put about $214 million last year in FTX’s international and US businesses. Coinbase released a statement saying that while the crypto exchange operator has $15 million worth of deposits on FTX to facilitate business operations and client trades, its exposure is minimal. 

SoftBank’s core Vision Fund unit is expected to log billions of dollars in losses due to the rout in tech stocks when it reports earnings on Friday. 

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