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Masa Son’s multi-generational vision is running into a brick wall: The public markets

Masayoshi Son, chairman and chief executive officer of SoftBank Group at the SoftBank World 2018 event in Tokyo, Japan.

Kiyoshi Ota | Bloomberg | Getty Images

SoftBank is learning the biggest obstacle to success for its $100 billion Vision Fund are the public markets. That’s where founder and CEO Masayoshi Son’s long-term ambitions are colliding head-on with the near-term expectations of Wall Street.

The theme of Son’s Vision Fund, which has already deployed more than $70 billion in dozens of companies (primarily privately held technology companies) is to bet big and move quickly. In one of the fund’s first press releases, SoftBank explained the purpose was to expedite building businesses that will make the next stage of the Industrial Revolution possible, requiring “unprecedented large scale long-term investment.”

Founders consistently gush over Son’s emphasis to move faster with expansion efforts and become No. 1 in their core area of business, no matter the associated costs. Son encourages his investments to push for as much market share as possible, using scale as their moat to competitive threats.

But long-term investment in growing technology companies is easier when those companies don’t have quarterly projections to hit and pressure from public investors to show consistent earnings growth. This week’s news that public investors are valuing WeWork at less than $25 billion after SoftBank’s latest investment in January marked the company at a $47 billion valuation should give Son pause. Maybe going public doesn’t always line up with the goals of the Vision Fund.

Of course, the Vision Fund isn’t a Kumbaya charity program. It’s a late-stage venture capital/private equity fund, with investments from SoftBank, sovereign wealth funds from Saudi Arabia and The United Arab Emirates, and other technology companies including Apple, Qualcomm, Foxconn and Sharp. Everyone in the fund is there to make money, and in order to make money, investments need to be liquid. Going public is still the best way to make this happen.

Still, public monetization seems to be the biggest wrench in SoftBank’s long-term strategy. Uber, SoftBank’s other huge investment ($7.6 billion), recently went public to disappointing results. SoftBank is now more than $600 million underwater on its ride-sharing investment.

Its investment in Slack has fared better: The firm invested around $335 million in Slack from 2017 to 2018 at between $8.70 and $11.91 a share. As of Friday’s close, its stake was worth just over $1 billion. Even so, the value of this stake has declined almost 30% since Slack’s debut, and shares tumbled 8.8% on Friday to $27.38, the lowest since the company’s market debut in June and barely above the debut “reference price” of $26.

Public vs. private

SoftBank may still be proven right.

Some of today’s tech giants, like Amazon and Netflix, have historically gotten long leashes from public investors, who watched them lose money for years while proving out their business models. maybe this is just a moment in time, and Uber,