SoftBank has just filed for a SPAC IPO of $ 525 million. This is why.

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A subsidiary of SoftBank and its Vision Fund has filed to raise $ 525 million in a blank check from the company. The special purpose acquisition company, or SPAC, also includes a commitment from SoftBank affiliates to put hundreds of millions of extra dollars into any deal. It’s only a surprise that it took so long for Masayoshi Son’s SoftBank to enter the world of SPACs in a breakthrough year for the structures.

SPACs raise money from IPO investors with the aim of identifying and merging into an operating company, usually within two years. SoftBank’s vehicle (ticker: 9984.Japan), called SVF Investment, plans to target companies in a similar form to its Vision Fund venture capital giant. Monday’s IPO filing with the Securities and Exchange Commission lists “disruptor,” “visionary founders,” and “great market opportunities” as acquisition criteria.

The prospectus notes that SoftBank has investments and relationships with more than 100 growth-stage companies around the world, and that some of them may be attractive targets for its SPAC. The CEO of the SPAC will be Rajeev Misra, the chief of

Softbank‘s

investment unit and the Vision Fund.

“We crossed many attractive companies who wanted our support at IPO and beyond, but we lacked the resources to work with them,” reads SVF Investment’s IPO filing. “This trend has only increased over the past year as more companies have decided to disclose. Our SPAC will bridge SoftBank’s private and public investment strategies by enabling us to partner with a fast-growing, IPO-ready technology company. “

Some startups that the Vision Fund had invested, such as

Open door

(OPEN) – have been made public through SPACs this year, while others – like

By Dash

(DASH) – have gone the traditional IPO route.

By sponsoring a SPAC, SoftBank could diversify its funding sources. The Japanese telecom company turned investment company has recently been in divestment mode, offering its stakes in the wireless company

T-Mobile US (TMUS)

and chip designer Arm, plus other assets. SoftBank has used that proceeds to buy back stock and pay off debt, and it has also reportedly talked about going private.

SVF Investment will debut on the Nasdaq exchange by selling $ 10 units under the symbol “SVFAU.” These will consist of one common stock and a quarter of a warrant – essentially a call option – exercisable at $ 11.50 after the SPAC’s potential merger is completed. Within a few months of the IPO, the holdings of SVF Investment will be split and shares and warrants can be traded separately under the tickers “SVFA” and “SVFAW” respectively.

The $ 525 million offer of 52.5 million units includes an over-allotment option from the underwriters for an additional 7.9 million units, which could bring the SPAC’s total IPO to $ 604 million. The joint book-running managers of the offering are

Citigroup,

Deutsche Bank Securities and Cantor.

The SoftBank affiliates have also committed to purchase an additional $ 300 million in units at the time of a potential merger closing. SVF Investment could potentially have a war chest of about $ 900 million to close a deal.

As usual with SPAC transactions, SVF Investment sponsors will receive shares equal to approximately 20% of the total for a negligible amount. The SoftBank affiliates have also committed to purchase an additional 8.3 million to 9.4 million warrants for $ 1.50 each through a private placement, depending on the size of the IPO. That means that the sponsors will enjoy more of the benefits of a well-received deal, but it can cause more dilution for other shareholders.

It’s 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 nearly double the money raised by SPACs over the past decade, with nearly 50 remaining at IPO today. They’ve publicized dozens of notable companies, including many of the hottest electric vehicle stocks of the year:

Nikola

(NKLA),

Hyliion

(HYLN), and

QuantumScape

(QS) all merged with SPACs this year. So did

DraftKings

(DKNG),

MultiPlan

(MPLN), and more.

Write to Nicholas Jasinski at [email protected]