On Monday, the Japanese conglomerate announced plans to raise more than half a billion dollars in New York through an initial public offering of a special purpose acquisition company (SPAC).
The newly formed firm, SVF Investment Corp., plans to list on the Nasdaq under the ticker symbol “SVFAU.” It will initially attempt to raise $ 525 million, but that can go up to nearly $ 605 million if there is strong interest in the stock.
SVF is sponsored by a subsidiary of SoftBank Investment Advisers, which oversees the Vision Fund – SoftBank’s vehicle for many of the company’s splashy tech investments.
SPACs are shell companies with limited or no corporate resources, which go public only to raise money and buy existing businesses. These so-called “blank check” firms used to be mocked on Wall Street, but have really taken off this year.
Back in violation
The announcement is yet another signal that SoftBank(SFTBF), lled by Japanese billionaire Masayoshi Son, is ready to jump back on the crime after working to raise money this year during the coronavirus pandemic.
After a series of embarrassing losses, Son forced the company to settle down. The company said last month that it had sold nearly $ 100 billion in assets during the fiscal year, including $ 14 billion in shares in its Japanese mobile carrier and a $ 40 billion sale of British chipmaker ARM. The latter is still pending regulatory approval.
But that strategy is changing.
Earlier this year, SoftBank reportedly bought $ 4 billion worth of options tied to underlying stocks it had previously bought in tech companies such as Amazon, Microsoft and Netflix. While those bets didn’t seem to be paying, they did indicate that Son was ready to take risks again.
This month, SoftBank bought another new venture and invested approximately $ 780 million in Sinch, a Swedish telecom and cloud service provider.
SoftBank has confirmed it wants to use its SPAC to make a purchase. In a Monday at the US Securities and Exchange Commission, the new company said it would look for a potential target somewhere “broad in the technology landscape,” which could include everything from artificial intelligence and fintech to semiconductors and robotics.
It noted that it would not rule out the possibility of buying a company in which SoftBank has already invested, saying it was “not prohibited” from pursuing such a deal. In that case, the company said it would consult an independent party to ensure that “that is fair to our business from a financial standpoint.”
SPAC mania
SoftBank is the latest big name to jump on the SPAC bandwagon. According to data provider Refinitiv, $ 75.4 billion has been raised so far in 2020 through the IPOs of US-listed SPACs.
That’s a huge leap from 2019, when such companies raised just $ 13.1 billion.
A slew of major companies have recently opted to take the same route, including Playboy, DraftKings and electric vehicle startups Nikola and Arrival. Billionaire business leaders such as Richard Branson and Peter Thiel have also joined the campaign.
But some fear that these deals are spiraling out of control and could be an ominous signal of misplaced euphoria in the marketplace.
Tech stocks also came out this year. The tech-heavy Nasdaq Composite(COMP)for example, has increased by 42% so far in 2020.
SoftBank itself hinted at the momentum in its prospectus, saying it was encouraged to get involved after watching the space warm up.
“Over the past 18 months, we have seen significant growth in public market investor interest in top-quality companies operating in technology-focused industries,” the company said. “To that end, we believe that launching a blank check business now gives us the opportunity to maximize value to our investors.”
– Matt Egan and Charles Riley contributed to this report.
