A branch of SoftBank and its Vision Fund has filed for $525 million in a blank-check company offering. The special purpose acquisition company, or SPAC, includes a commitment from SoftBank affiliates to put hundreds of millions of additional capital into an impending deal. It’s a little bewildering that it took Masayoshi Son’s SoftBank this long to step into the SPAC space during a breakout year for the structures.
SPACs raise money from investors in an initial public offering, aiming to identify and merge with a company, typically within two years. SoftBank’s vehicle, called SVF Investment, is preparing to target companies in a similar mold to its Vision Fund venture capital titan. Its IPO filing with the SEC on Monday lists “disruptor,” “visionary founders,” and “large market opportunity” as acquisition criteria.
The synopsis notes that SoftBank has investments with more than 100 growth-stage companies around the world, and that some of them may be potential targets for its SPAC. The SPAC’s CEO will be Rajeev Misra, the chief of Softbank’s investment unit and the Vision Fund. See Spot Run: Softbank Sells Boston Dynamics to Hyundai
“We intersected with many compelling companies that wanted our support at IPO and beyond, but we lacked the vehicle to partner with them,” reads SVF Investment’s IPO filing. “This trend has only increased over the past year as more companies have decided to list publicly. Our SPAC will bridge SoftBank’s private and public investing strategies by enabling us to partner with a fast-growing, IPO-ready technology company.”
Some startups that the Vision Fund had invested in—such as Opendoor [$OPEN]—have gone public via SPACs this year, while others—like DoorDash [$DASH]—have taken the traditional IPO route. Sponsoring a SPAC would allow SoftBank to diversify its sources of funding. The Japanese investment firm has been in divestment mode of late, managing its stakes in wireless company T-Mobile [$TMUS] and chip designer Arm, plus other assets. SoftBank has used those proceeds to buy back stock and pay down debt.
SVF Investment will premier on the Nasdaq exchange by selling $10 units under the symbol “SVFAU.” Those will consist of a common share and one quarter of a warrant—essentially a call option—which is exercisable at $11.50 after the SPAC’s potential merger closes. Within a few months of the IPO, SVF Investment’s units will split, and shares will be able to trade separately under the tickers “SVFA” and “SVFAW,” respectively.
The $525 million offering of 52.5 million units includes an underwriters’ overallocation option for another 7.9 million units, which could bring the SPAC’s IPO total to $604 million. The SoftBank affiliates have also pledged to buy as much as $300 million of units at the time of a potential merger closing. SVF Investment could potentially have a war chest of some $900 million to do a deal.
As is typical in SPAC transactions, SVF Investment sponsors get shares equal to about 20% of its total for a negligible amount. The SoftBank affiliates have also vowed to purchase an additional 8.3 million to 9.4 million warrants for $1.50 each in a private placement, depending on the size of the IPO. That means the sponsors will benefit more from the upside of a well-received deal, but it could create more dilution for other shareholders.
It has been a record year for SPACs. The previously obscure vehicles have raised $81 billion in 243 IPOs in 2020, according to SPAC Insider. That’s almost double the funds raised by SPACs in the previous decade combined, and there are almost 50 more currently on file to IPO. They’ve brought public dozens of notable companies, including many of the year’s hottest electric vehicle stocks: Nikola [$NKLA], Hyliion [$HYLN], and QuantumScape [$QS] all merged with SPACs this year. So did DraftKings [$DKNG], MultiPlan [$MPLN], and more.