SoftBank Vision Fund is jumping on the SPAC bandwagon, announcing that it plans to debut a special purpose acquisition company in the next two weeks.
The hottest trend in 2020, SPACs or special purpose acquisition companies — sometimes called “blank-check companies” — go public as cash shells, with sponsors later identifying an operating business to merge with.
They raise money in an initial public offering (IPO) before merging with the private company.
SPACs are being used to take a record number of companies public, bypassing the traditional IPO, Reuters reported. SoftBank-backed home-selling platform Opendoor announcing plans in September to list through such a merger.
Masayoshi Son’s Japanese conglomerate SoftBank isn’t a bank. It owns stakes in tech, energy, and financial companies. It also runs Vision Fund, the world’s largest tech-focused venture capital fund. With more than $100 billion in capital, Vision Fund was known in recent years mainly for its investments in startups.
These investments included WeWork, and they didn’t always work out.
The troubled co-working space giant WeWork collapsed in 2019 after its initial public offering and $47-billion valuation failed to materialize. The company faced an SEC inquiry into possible rule violations.
Seeking to capitalize on the investor frenzy surrounding SPACs, Rajeev Misra, the head of Vision Fund, spoke without giving details in a Bloomberg interview at the Milken Institute’s virtual conference.
The target size of Vision Fund’s blank-check company has yet to be determined, a person familiar with the plans told Bloomberg. SoftBank is expected to seek outside funds and may contribute some of its own capital.
The SPAC will allow public investors “to bet on SoftBank’s money managers and their chops,” Fortune reported.
SoftBank backed German digital-payments company Wirecard to the tune of $1 billion, lending its name and reputation to the company and temporarily quieting questions about the legitimacy of its profits, Wall Street Journal reported. Wirecard unraveled in June in an accounting scandal. SoftBank offloaded the financial risk to other investors. Mutual funds and pension funds that bought Wirecard bonds are sitting on massive losses, WSJ reported.
SoftBank executives stood to profit personally on the deal, while the company itself never put in any money.
More than 115 initial SPAC public offerings have raised nearly $44 billion this year — more than the past five years combined, according to data from SPAC Insider, Barons reported.
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Son said this week that his investment in WeWork was “foolish,” CNBC reported. SoftBank gave WeWork a valuation of $2.9 billion as of March 31, down from $7.3 billion as of Dec. 31 and down from $47 billion before its botched 2019 IPO.
The boom in special purpose acquisition companies isn’t just a passing fad, according to private equity investor Joshua Harris, co-founder of Apollo Global Management. Apollo has raised its own SPACs and exited its position in companies through the blank check vehicles, Harris said.
SPACs are filling a needed role for companies that are closing in on going public, Harris said at the Delivering Alpha conference presented by CNBC and Institutional Investor.
“Since time immemorial cash shell listing booms have heralded fraud and collapse,” Merryn Somerset Webb wrote for Financial Times. Famous bubble companies throughout history were set up for people to invest in “an undertaking of great advantage, but nobody to know what it is.”
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