SoftBank's Saudi ties unnerve investors as shares drop 8 percent

By Sam Nussey

TOKYO (Reuters) - SoftBank Group Corp saw its shares drop on Monday as fallout from the disappearance of a Saudi journalist spread to the Japanese conglomerate, whose nearly $100 billion Vision Fund is almost half financed by Saudi Arabia.

SoftBank's Vision Fund is the world's largest technology investment vehicle, and represents one of a number of deals group Chief Executive Masayoshi Son has sealed with the Saudi government.

But the oil-rich kingdom has found itself threatened with "severe punishment" by U.S. President Donald Trump over the disappearance this month of Jamal Khashoggi, a journalist critical of Saudi authorities. Turkey said Khashoggi was killed in the Saudi consulate in Istanbul, while Saudi Arabia said the journalist left unharmed.

 

Concern over the disappearance has seen a growing number of attendees pull out of the "Davos in the Desert" investment conference, which has become the biggest show for investors to promote Saudi Crown Prince Mohammed bin Salman's reform vision.

With SoftBank's Saudi ties causing jitters, the share sell-off is "more psychological than anything related to worries on its fundamentals," said Makoto Kikuchi, chief executive of Myojo Asset Management.

SoftBank stock was down almost 8 percent in early afternoon trade. With further investor concerns including a Sino-U.S. trade dispute and possible slowdown in China's economy, the benchmark Nikkei share price index was down 1.7 percent. Meanwhile, crude oil prices rose as concerns over the missing journalist stoked worries about supply.

A SoftBank spokesman declined to confirm whether SoftBank executives will attend next week's conference. Son, Vision Fund chief Rajeev Misra and ARM Holdings CEO Simon Segars were listed as attendees on a conference webpage that is no longer available.

Dara Khosrowshahi, CEO at Uber Technologies Inc - in which SoftBank is the largest shareholder - said last week he would no longer attend. Saudi Arabia also has its own investment in the ride-hailing firm.

SAUDI TIES

Under Son, SoftBank built its global influence through tech investments and raised over $93 billion last year to create its Vision Fund - with $45 billion coming from Saudi Arabia.

That tech exposure saw SoftBank caught up in a broader sell-off of technology stocks, with Monday's decline exacerbating a two-week slide in SoftBank shares that is nearing 20 percent.

Ties to the Gulf Kingdom extend beyond tech investment. SoftBank and Saudi Arabia said in March they would build the world's biggest solar power generation project.

The kingdom has appointed Son as an advisor for its planned $500 billion NEOM high-tech city, and in October last year, it said it was considering selling a large stake in Saudi Electricity Co to the Vision Fund.

The increasingly high-stakes announcements - and lack of detail on related costs and implementation - have left analysts struggling to calculate potential impact on SoftBank finances.

(Reporting by Sam Nussey; Additional reporting by Ayai Tomisawa and Yoshiyuki Osada; Editing by Edwina Gibbs and Christopher Cushing)