SoftBank is under fire, with a prominent Silicon Valley venture capitalist querying the way the $97bn (£79bn) mega-fund behind the WeWork debacle proposed to pay investors returns.
The charge was levelled by Chamath Palihapitiya after part of a SoftBank investor presentation was put online.
The post showed SoftBank offered to pay a fixed return to preferred investors, but this might come from their cash, not from growth in the value of companies in its Vision fund. In effect, investors would be paying themselves. Palihapitiya tweeted: “SoftBank Vision Fund is essentially running a Ponzi scheme if this is true.”
A source close to SoftBank said the fund was structured to cater to the different risk appetites of its investors, and payouts would only come from shareholder funds if its portfolio didn’t deliver sufficient returns.
Preferred stock isn’t exactly unknown and it’s not conclusive evidence of a Ponzi either. It rather depends upon exactly what the terms were/are.
If it’s a return regardless of what the fund’s performance is doing then, well, that’s edging toward it, no? Or at least that’s more like debt than equity…..