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can't as in "that asset class does not meet the risk and liquidity requirements for cash management in general" not can't as in "de-facto illegal." derelictio

can't as in "that asset class does not meet the risk and liquidity requirements for cash management in general" not can't as in "de-facto illegal." dereliction of fiduciary duty is illegal, of course the circumstances matter. I think you are conflating capex + investments with overall cash management. They already invest a lot in the vision fund. This is a way for them to route more money into the vision fund on top of what they already invest, by tapping into an additional asset class within their portfolio allocation. If a company's portfolio is a high percentage of cash management products, that's a bad sign of low innovation. If the portfolio is too low a percentage, that's a bad sign also because they would be unable to access liquidity to cover operations given a downturn or sudden need for capex etc... Different companies have different allocations but healthy companies (including google) have allocations into a diverse bucket of asset classes... > consider this concrete counterexample to your claim The fact that Google also has a VC arm is not a counter argument. Google allocates some amount of its cash into cash management products as well. > SoftBank's investors don't need SoftBank to hold cash, treasuries or corporate paper on their behalf Their customers do. They're still a major telecom company in Japan -- they certainly have operations they need to protect.

hollerith 7y ago
I agree that a company needs to make sure it has enough cash and cash-like assets to cover their expenses. Failure to do so has often resulted in the dissolution of the company although it is very rare for that to be the root cause of the dissolution of a public-traded company of SoftBank's size. But again management has broad leeway here. Can you cite one example of a company that was sued because management ran out of cash and cash-equivalents? When you say "fiduciary duty", you imply that the company can be sued.
hollerith 7y ago
>Different companies have different allocations but healthy companies (including google) have allocations into a diverse bucket of asset classes OK, but that's different from your "you can't just take corporate cash and invest it in a private equity fund". If you'd written instead, "having their employees carry some of the equity risk is a way for SoftBank to increase the size of the private equity fund while continuing to make sure that they have enough cash to continue operations", I wouldn't've felt the need to call you out. I don't know enough about Japan to say, but if it were a US company making this move, I would be more inclined to believe that the loans are mostly intended as a perk for employees like this comment claims: https://news.ycombinator.com/item?id=20736072 https://news.ycombinator.com/item?id=20736072
C1sc0cat 7y ago
A company that held ALL its cash in a back account would be failing its share holders. I think maybe you misunderstand what "fiduciary duty" means here.
vikramkr 7y ago
This isn't dereliction of fiduciary duty. It's not illegal for a company to go bankrupt or to spend all of it's money on highly risky investments and lose it all as long as it is done in good faith, and there aren't any magical guidelines for risk and liquidity requirements that companies have to accept legally. Management can do whatever they think is the best thing to do for the firm that doesn't break the law.

hollerith 7y ago

I agree that a company needs to make sure it has enough cash and cash-like assets to cover their expenses. Failure to do so has often resulted in the dissolution of the company although it is very rare for that to be the root cause of the dissolution of a public-traded company of SoftBank's size. But again management has broad leeway here. Can you cite one example of a company that was sued because management ran out of cash and cash-equivalents? When you say "fiduciary duty", you imply that the company can be sued.

hollerith 7y ago

>Different companies have different allocations but healthy companies (including google) have allocations into a diverse bucket of asset classes OK, but that's different from your "you can't just take corporate cash and invest it in a private equity fund". If you'd written instead, "having their employees carry some of the equity risk is a way for SoftBank to increase the size of the private equity fund while continuing to make sure that they have enough cash to continue operations", I wouldn't've felt the need to call you out. I don't know enough about Japan to say, but if it were a US company making this move, I would be more inclined to believe that the loans are mostly intended as a perk for employees like this comment claims: https://news.ycombinator.com/item?id=20736072 https://news.ycombinator.com/item?id=20736072

C1sc0cat 7y ago

A company that held ALL its cash in a back account would be failing its share holders. I think maybe you misunderstand what "fiduciary duty" means here.

vikramkr 7y ago

This isn't dereliction of fiduciary duty. It's not illegal for a company to go bankrupt or to spend all of it's money on highly risky investments and lose it all as long as it is done in good faith, and there aren't any magical guidelines for risk and liquidity requirements that companies have to accept legally. Management can do whatever they think is the best thing to do for the firm that doesn't break the law.