SoftBank completes OpenAI pledge, lifting stake to 13%

SoftBank Group said on Thursday, Oct. 1, that it has put the third and final $10 billion into OpenAI through its Vision Fund 2. That completes the $30 billion follow-on commitment it announced in February. SoftBank has now invested $64.6 billion in the ChatGPT maker, which gives it about 13% of the company.ibtimes+2

The payment fulfills one of the largest pledges in OpenAI's record fundraising round. According to Reuters, OpenAI secured $122 billion in commitments in that round, at a valuation of $852 billion. Amazon Amazon.com, Inc. ↗ 1.33%, Nvidia ↗ 1.34% and SoftBank anchored the raise.investing

Bonds replace bridge loan

SoftBank said it paid for the final tranche with money from foreign-currency senior notes. It set the terms for those notes on Sept. 24. Reuters reported that the roughly $11.1 billion offering was the largest high-yield corporate bond sale ever recorded worldwide.tradingview+2

The company also cancelled the remaining $10 billion it had not yet drawn under a $40 billion bridge loan, effective Sept. 30. It signed that loan on March 27 with JPMorgan Chase ↘ 0.24%, Goldman Sachs The Goldman Sachs Group, Inc. ↗ 0.66%, Mizuho Bank ↗ 1.21%, Sumitomo Mitsui Banking Corporation ↗ 0.47% and MUFG Bank Mitsubishi UFJ Financial Group, Inc. ↗ 0.88%. SoftBank used the loan to pay for the first two tranches, on April 1 and July 1. It decided on Sept. 9 to repay the $25.9 billion still owed, and with this cancellation the loan is fully settled.ibtimes+2

SoftBank said its financial policies remain unchanged. It aims to keep its loan-to-value ratio below 25% in normal market conditions and to hold enough cash to cover at least two years of bond redemptions.unite

Nvidia also pays its final share

The Information, citing sources, reported that Nvidia also made the final $10 billion payment on its own $30 billion pledge to the round. Nvidia did not comment publicly in the reports reviewed.theinformation+1

Newsquawk noted that a chip supplier is funding one of its biggest customers. It said such deals have historically drawn scrutiny over the quality of the supplier's revenue.newsquawk

Son's concentrated bet

The investment deepens founder Masayoshi Son's push to make SoftBank a dominant investor in artificial intelligence. SoftBank shares rose in Tokyo trading after the announcement.investing+1

When SoftBank announced the follow-on investment on Feb. 27, Son said OpenAI "is a clear leader, with world-class technology and an unparalleled global user base, and we have strong conviction in its continued growth".unite

The OpenAI shares are recorded at fair value and remeasured every quarter. As a result, SoftBank's earnings will rise and fall with OpenAI's private valuation. Newsquawk said completing these commitments could open the way for OpenAI's next funding round, which may come at a different valuation.newsquawk+1