Altman can afford to wait, but Masayoshi Son can't: OpenAI's failure to go public this year exposes SoftBank's credit weakness with a $20 billion shortfall.

OpenAI's decision to postpone its IPO this year has put its largest external shareholder, SoftBank, in the spotlight of the credit market—Altman can afford to wait, but Masayoshi Son cannot.

As reported by Wall Street Insights , on September 13, Sam Altman stated in an interview with Fortune that although OpenAI had secretly filed for an IPO in June, it would not go public this year, and would instead prioritize addressing concerns related to AI security.

This statement exacerbates SoftBank's liquidity crisis. SoftBank executives are meeting with investors in New York this week, planning to issue $10 billion to $20 billion in bonds.

SoftBank shares plunged nearly 11% in Tokyo on Monday, while credit default swaps (CDS) rose to their highest level since March.

Bloomberg estimates that SoftBank faces a funding gap of at least $20 billion, and the proceeds from the bond issuance are precisely intended to repay the $40 billion bridge loan it previously borrowed to increase its investment in OpenAI. How to fill this gap has become Masayoshi Son's biggest challenge going forward.

IPO expectations dashed, financing pressure continues to rise.

OpenAI's IPO was the most crucial exit point in SoftBank's investment strategy.

The market previously expected OpenAI to complete its IPO as early as September with a valuation of over $1 trillion. SoftBank has invested approximately $64.6 billion and holds about 13% of the shares. The latest round of financing valued OpenAI at $852 billion.

Altman's statement dashed this expectation, as SoftBank is unable to liquidate its holdings in the short term, which is a clear risk signal for credit investors.

According to Bloomberg Intelligence estimates, even though SoftBank has raised $10 billion through margin loans linked to its OpenAI shares and $6.3 billion through yen retail bonds, its funding gap will still be at least $20 billion.

If Masayoshi Son further increases his investment in data centers in the United States, the actual funding requirements will be even higher.

SoftBank's balance sheet structure also unsettles credit investors. Its risky investment portfolio is highly concentrated, with its chip design companies Arm Holdings and OpenAI alone accounting for approximately 75% of its total asset value.

More importantly, Masayoshi Son bought OpenAI shares on borrowed money, and now SoftBank's recurring cash flow, such as the dividend income from its Japanese telecommunications subsidiary, is far from enough to cover interest expenses.

The era of yen carry trades is over; the advantage of cheap financing has disappeared.

The yen carry trade that has underpinned Masayoshi Son's decades-long investment model is losing its effectiveness.

About half of SoftBank’s interest-bearing debt is denominated in yen, while almost all of its equity assets are denominated in US dollars.

With the yield on Japanese 10-year government bonds rising to around 3%, and the Bank of Japan expected to raise interest rates again this week, the cheap domestic funds that Masayoshi Son relied on are no longer readily available.

SoftBank's shift to a roadshow for institutional investors in the US is a direct reflection of this changing reality.

Market traders have sensed an opportunity, betting that SoftBank will have to offer lucrative terms to alleviate liquidity pressures. SoftBank's existing dollar bonds are trading closer to lower-rated B-level corporate bonds, significantly below Fitch's BB+ rating.

The yield on the 5-year notes issued in April this year has exceeded 8.5%, comparable to that of junk-rated data center developers such as Core Scientific.

Is it a desperate gamble or a strategic high-stakes bet? The market remains skeptical about concentrated risk.

Masayoshi Son's heavy bet on OpenAI has raised questions in the market. His initial investment of $34.6 billion, made when OpenAI was valued at approximately $260 billion, has already yielded substantial returns.

However, his additional $30 billion investment this year came after the valuation had risen significantly, further straining the company's balance sheet.

This strategy contrasts sharply with industry giants like Nvidia, which opted for a diversified approach, investing in multiple competing large language model developers, while Masayoshi Son concentrated his bets on a single target.

Supporters might see this as the ultimate embodiment of Masayoshi Son's consistent "all-or-nothing" investment philosophy, a style that has propelled him to the ranks of Japan's richest men.

However, credit market investors clearly do not have the same risk appetite. They are more concerned about asset concentration risk and funding gaps, and are forcing Masayoshi Son to pay the price for his beliefs by demanding higher premiums.

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