But things have turned out just fine for him... Today, SoftBank is an international conglomerate worth more than $100 billion. And Masa is one of Japan’s richest men, with a net worth of roughly $23 billion. (That’s impressive, but it’s only a fraction of his net worth before the dot-com bust.) For the past couple of years, this valuation fallacy Meanwhile, in Saudi Arabia, the country’s sovereign fund is in an unusual situation... Blessed with what may be the most lucrative business venture in the history of mankind, the Saudis find themselves trying to diversify away from oil. It’s an interesting controversy. In February, the Wall Street Journal noted that one Saudi oil executive asked a simple question a couple of years ago in a public meeting... [The Saudi Arabian Oil Company] spends $5 to extract a barrel of oil and then sells it for 10 to 20 times that much. Where else, he asked, could Saudi Arabia possibly invest to generate such returns? No one had an answer, the executive said. Enter Masa... In 2016, the Saudis gave him the first of many investments that have come to total $100 billion. Masa’s mission: to diversify the Saudis out of oil and into surefire tech home runs. Through the venture known as the SoftBank Vision Fund, Masa has spent much of the has been playing out – on a huge scale – with private companies.
This latest transaction immediately jacks up the local comps... So your original portfolio of 10 houses is now instantly worth $2.5 million ($250,000 per house times 10 houses). In other words, you spent an additional $500,000 to enjoy a $1.5 million paper profit on your original $1 million investment. That’s right, folks... On your financial statements, you can claim the value of your initial $1 million investment as $2.5 million, and your total $1.5 million investment as $3 million ($250,000 times 12 houses). Anyone with an ounce of common sense understands that the $3 million number isn’t the actual value. It’s a nonsensical value based on your willingness to throw additional funds at an unproven investment. It’s an easily manipulated “valuation fallacy.” For the past couple of years, this valuation fallacy has been playing out – on a huge scale – with private companies. And most important for you as individual investors, these valuation fallacies will infiltrate the public markets in 2019 . So... HOW DID WE GET HERE? The nexus of this valuation travesty is a Japanese businessman named Masayoshi Son... Son, who often goes by the nickname “Masa,” founded a computer-parts store called SoftBank in 1981. He eventually made a name for himself by investing in Yahoo back in 1995 and Alibaba – China’s version of Amazon – in 1999. When the tech bubble burst, Masa suffered paper losses of $70 billion.
American Consequences
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