Softbank’s Lithium Investment

June 4, 2018


In the past few weeks, Softbank’s Vision Fund has been in the Lithium and Auto news. First, it was their investment in Nemaska Lithium. Next, it was their investment in General Motor’s Cruise Automation which was completed only last week.  The purpose of General Motor’s cruise is to find a solution for automated driving which is the next big frontier for car companies.

Our question is, when it comes to their investments into the lithium and car industries (which comes back again to lithium potentially), what does it mean for the lithium industry?

Background

There’s softbank and then there’s softbank’s vision fund.  Softbank is a Japanese holding company which we know best in the United States for it’s partnership with Yahoo.  Yahoo was one of the first web browser companies and was very big before Google came on the scene. Softbank also partnered with investment firm E-Trade as another example. More recently, Softbank acquired Sprint in 2012 which was and is a major U.S. telecom company.

In May 2017, Softbank established the Softbank Vision fund in order to “make large-scale, long-term investments in companies and platform businesses that have the potential to spark the next generation of innovations.”  With close to $100 Billion (USD) under management, investors in the fund include Apple, Qualcomm (maker of chip software), Sharp (television company), and the Govt of Saudi Arabia.

What major investments have they made to date?  

The one’s which strike our radar are investments into Nvidia, WeWork, Flipkart, Uber, Didi Chuxing, and Slack.  These companies are among the most well known companies in their portfolio of investments to date.  The companies are all private with exception of Nvidia and each are reportedly worth many billions of dollars to date.  

For example, Nvidia is a U.S. chip maker located in California now worth $160 Billion dollars (USD). Since the investment into the company, Softbank has nearly made 100% on its original capital.  

For the private companies, it’s hard to exactly value the investment.  Each of the private companies have a lot of potential. WeWork created the temporary office rental category and is quickly branching into many other industries.  Flipkart is an Indian E-Commerce company which was in the news again recently for an investment put forth by Walmart, one of the largest retailers in the world. As part of that investment, Softbank actually sold all of its stake for roughly $4B. Slack is “ cloud-based set of proprietary team collaboration tools and services” and is very well known within certain company circles. 

WeWork and Flipkart thus far seem like killer investments conducted by SoftBank.  Slack is an exciting company with a lot of potential but the verdict is a little more uncertain for the investment itself compared to the other two private companies.  

What does this all mean for investors in Lithium?  

  1. Softbank sees immense potential in the lithium industry.  Getting back to their investment strategy…they look to invest “in businesses that have the potential to spark the next generation of innovations.”  
  2. Does this mean that Nemaska is a winner? Not necessarily. It means Softbank believes in them.  Yet, it does not necessarily mean that they will be the clear winner or be the best of all lithium companies to invest in. Let’s remember, Softbank has a fund worth $100 Billion Dollars (USD) so this investment is a small drop in the bucket for them. Their investment in the company does not necessarily equate a successful Nemaska outcome.  Essentially, the verdict is out on this one for now. It’ll be exciting and interesting to see what will come over the next 12-18 months for the company. Stay tuned as we’ll be outlining our thoughts on Nemaska as an investment in the near future.
  3. Softbank brings legitimacy.  Getting an investment from Softbank lifts the overall name and bullishness of the industry. When companies approach investors in the future, all they’ll have to do is mention Softbank’s lithium investment and that will immediately bring legitimacy.

In conclusion, for lithium investors, this is exciting news and a good day has come to the industry now that Softbank has gotten involved.  

Stay tuned via twitter and email to get our analysis as it hits the tape!