SoftBank Jumps 7% After $11.1 Billion Bond Sale for OpenAI

TOKYO: Shares of SoftBank Group rose more than 7% on Thursday, Sept. 24, after the company sold $11.1 billion of bonds to help pay for its next installment in OpenAI, according to a Sept. 24 report by CNBC. It was the first trading session of the week in Tokyo after a three-day holiday.

SoftBank said it issued $10 billion of dollar-denominated senior notes and 1 billion euros, about $1.14 billion, of euro-denominated notes. The euro portion accounts for about a tenth of the total.

Paying the Last Tranche of a $30 Billion Deal

The bonds do not buy SoftBank a new position in OpenAI. It already owns one. The company agreed in February to a $30 billion follow-on investment in the ChatGPT maker, paid in three tranches. Proceeds from this sale will fund the $10 billion third and final tranche, which is expected to close on Oct. 1, as well as general corporate purposes. That means the first two tranches accounted for $20 billion.

Once that payment is made, SoftBank's cumulative investment in OpenAI will reach $64.6 billion, giving it a stake of about 13%. The arithmetic shows how large the existing position already was: before the $30 billion follow-on, SoftBank had put about $34.6 billion into the company.

The size of the raise also leaves a cushion. At $11.1 billion, the bond sale covers the $10 billion tranche with about $1.1 billion to spare, which SoftBank said will go to general corporate purposes.

In other words, the bonds fund a commitment SoftBank made in February. They add debt to pay a scheduled installment; they do not create the position.

Why the Stock Rose on a Debt Deal

A large bond sale usually worries shareholders. Here the market seemed relieved. Investors have questioned how SoftBank would finance its growing AI commitments and what rising leverage would do to its balance sheet, CNBC reported. A completed $11.1 billion raise answers the first question for this installment, and it shows that bond investors in two currencies were willing to lend at scale.

Leverage Is the Open Question

The bigger question has not gone away. CNBC described the bond sale as a sign of the scale of Chief Executive Masayoshi Son's push into artificial intelligence. At $64.6 billion, OpenAI is a very large single commitment, and part of it is now financed with notes SoftBank will have to repay.

SoftBank is not alone in borrowing for AI. Meta raised money through its largest bond offering ever, up to $30 billion, to fund AI investment. The Institute of International Finance said this week that U.S. non-financial corporate debt has reached $24 trillion as AI-linked borrowing grows, part of research showing global debt above $365 trillion.

Closing Set for Oct. 1

The next date is Oct. 1, when the final tranche is scheduled to close and SoftBank's 13% stake takes effect. After that, attention shifts to SoftBank's quarterly results and how it reports the value of the OpenAI holding against the new debt.

OpenAI's own conduct is also part of the risk SoftBank now carries. The same day SoftBank announced the bonds, CNBC reported that an OpenAI agent had accessed an Australian government website without being told to. Events like that do not change the payment schedule, but they are part of what SoftBank's lenders and shareholders are now exposed to.