The recent stabilization of the "internal turmoil" at OpenAI has allowed SoftBank Group Corp's leader, Masayoshi Son, to reduce some of his personal financial exposure related to the company's massive investment in OpenAI. A little-noticed disclosure in SoftBank's earnings report on Thursday revealed that Mr. Son is no longer liable for approximately $10 billion in personal guarantees he previously pledged. These guarantees were made to enable a SoftBank-managed investment fund to commit hundreds of billions of dollars to OpenAI. However, he retains a long-term agreement: if this particular investment fund performs exceptionally well, he stands to receive substantial personal returns, a possibility significantly enhanced by the investment in OpenAI.
Among the often-questionable corporate governance practices prevalent in the AI race, Mr. Son's arrangement, while sometimes overlooked, is notably significant. In essence, if OpenAI goes public and its market valuation climbs into the trillions of dollars, he has the potential to personally earn tens of billions of dollars—a profit share far exceeding that of other SoftBank shareholders.
The mechanism works as follows: SoftBank has invested a colossal $346 billion in OpenAI, acquiring an 11% stake in the ChatGPT developer. However, this investment is not directly on SoftBank's balance sheet. Instead, the entire amount was placed into Vision Fund 2, established in 2019. This fund borrowed $85 billion from its parent company, SoftBank, for portions of its investments, with Mr. Son providing personal guarantees to back this loan.
He had a strong incentive to provide this guarantee. A previously disclosed agreement stipulates that once the realized and unrealized value of Vision Fund 2 exceeds its investment cost by 30%, Mr. Son becomes entitled to 17.25% of the fund's profits. Until recently, Mr. Son's prospects of realizing these gains appeared slim. The fund had made hundreds of unsuccessful investments in startups. A year ago, prior to the major investment in OpenAI, Vision Fund 2 was sitting on a $230 billion loss, equivalent to 40% of its total invested capital. Concurrently, much of SoftBank's investment team in Silicon Valley and elsewhere had been disbanded.
The situation has improved dramatically and is now more concentrated. SoftBank indicated this week that, primarily due to Mr. Son's bet on OpenAI, the fund has seen a $198 billion gain from its OpenAI stake. It is now reporting a loss of only about 3%, nearly reaching breakeven. Should OpenAI raise additional hundreds of billions of dollars at a $7.5 trillion valuation, SoftBank would record even larger paper gains.
All of this has significantly boosted SoftBank's stock price—it has doubled over the past year, acting as a public barometer of market confidence in OpenAI. However, the individual positioned for potentially outsized returns is Mr. Son himself, thanks to his rights to Vision Fund 2's profit share. Of course, the fund still has some distance to go before reaching the return threshold required for him to start receiving payments.
Meanwhile, even if "internal turmoil" were to re-emerge at OpenAI, Mr. Son appears to have lessened his personal downside risk. SoftBank stated that the loan it provided to Vision Fund 2 has been repaid and converted into preferred shares. If Vision Fund 2 achieves only moderate success, SoftBank will have priority in receiving profits, though the fund still holds numerous high-risk investments. Furthermore, SoftBank is relying heavily on debt to fund its AI investment commitments.
While AI may have mastered software engineering, Mr. Son remains a master of financial engineering.
In other market news, Pinterest's stock experienced a significant correction. The online image-sharing platform's shares plummeted 18% in after-hours trading on Thursday after it reported a deceleration in its fourth-quarter revenue growth by several percentage points. Pinterest's revenue grew by 14%, which was within the range forecast by the company in early November, but at the lower end of that range.
Pinterest attributed the slowdown to new furniture tariffs, which caused major retailers advertising on the platform to reduce their ad spending. Company executives had warned of the potential for such a slowdown when reporting third-quarter results in November. On Thursday, CEO Bill Ready seemed aware of the message he needed to deliver, though it did little to cushion the impact. "We are not satisfied with our Q4 revenue performance," he stated on an analyst call, adding, "We are moving urgently to return to our consistent performance of 15% to 20%-plus growth." In after-hours trading, Pinterest's stock fell to just over $15, its lowest level since April 2020, when markets were heavily impacted by the pandemic.
Other news includes the resignation of Gail Slater, the US Assistant Attorney General who led antitrust enforcement under the Trump administration. Before her appointment by Trump in late 2024, Slater was known as a tech hardliner, critical of the excessive power of companies like Google and Amazon. Anthropic announced the completion of a $300 billion funding round led by Singapore's sovereign wealth fund GIC and Coatue Management, resulting in a post-money valuation of $3.8 trillion. Airbnb reported an acceleration in its fourth-quarter revenue growth to 12%, with free cash flow increasing 13.7% to $521 million; its shares rose 5.7% in after-hours trading. Instacart reported fourth-quarter revenue of $99.2 billion, a 12% year-over-year increase, with its stock rising 15%. The platform's Gross Transaction Value for the December quarter grew 14% year-over-year, which management cited as the fastest growth rate in three years.