SoftBank shares slide after OpenAI misses funding target

SoftBank Group shares fell about 3% in early Tokyo trading on Monday, November 2, after reports that OpenAI had raised less than half of the money it wanted in its latest funding round. The ChatGPT maker has secured roughly $11 billion in commitments toward an initial $30 billion target, and the round values it at $1.25 trillion, below the $1.4 trillion it had hoped for, according to The Wall Street Journal News Corp ↗ 1.28%. SoftBank is one of OpenAI's largest backers, so any change in how OpenAI is valued feeds directly into how investors judge the Japanese conglomerate.wsj.com

A smaller round

The Financial Times first reported on October 30 that OpenAI had cut its target by $10 billion to about $20 billion, and that the first close was expected to come in below that after some investors reduced their allocations, Reuters reported via DealStreetAsia. Some large investors showed only "tepid" interest, TechCrunch noted, citing the Journal. A consortium of UAE investors that includes state-backed MGX is expected to be the largest participant, and wealthy individuals may be offered a later retail tranche at the same valuation, according to the FT report. OpenAI has not publicly confirmed the final size or terms, and the round has not closed.techcrunch.com+1

OpenAI wants to finish the raise before Anthropic's public listing, since the two companies draw on a similar pool of investors. It is also pursuing its own listing in 2027, Reuters reported. In March, OpenAI closed a $122 billion round at an $852 billion valuation, The Deep Dive reported.dealstreetasia.com+1

SoftBank's exposure

On October 1, SoftBank paid the last $10 billion tranche of its $30 billion follow-on investment, which brought its total investment in OpenAI to $64.6 billion for a stake of about 13%, Ground News reported, summarizing coverage of the company's disclosure. As of June 30, OpenAI accounted for about 18% of the adjusted equity value of SoftBank's holdings, FSMOne said.ground.news+1

Monday's drop in SoftBank shares came as markets across the region weakened. The Nikkei 225 and South Korea's Kospi both opened lower, and chipmaker Kioxia fell more than 12%, TradingKey reported, as investors pulled back ahead of the US midterm elections. According to Nikkei, SoftBank later won back much of that early loss during the session, Ad-Hoc-News reported. The stock is already down about 50% from its high earlier this year, Invezz noted, as chip holding Arm Holdings ↗ 6.69% has also slumped.tradingkey.com+2

Earnings ahead

SoftBank is set to report results for its fiscal second quarter on November 10, its investor relations page shows. Investors will be looking at how the company values its OpenAI stake and how it is paying for its growing AI commitments. A lower target valuation for new money "is not the same as a realized loss" on SoftBank's position, Ad-Hoc-News wrote. The final terms of OpenAI's round are still to be settled.ad-hoc-news.de+1