SoftBank joins Wall Street’s latest craze in hunt for acquisitions

On Monday, the Japanese conglomerate revealed plans to raise over half a billion dollars in New York through an initial public offering of a special purpose acquisition company (SPAC).

The newly created firm, SVF Investment Corp., plans to list on the Nasdaq under ticker symbol “SVFAU.” It will initially seek to raise $525 million, but that could go up to nearly $605 million if there’s strong interest in the shares.

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 operating assets, which go public solely to raise money and buy existing businesses. These so-called “blank check” firms used to be sneered at on Wall Street, but have taken off in a big way this year.

Back on offense

The announcement is yet another signal that SoftBank (SFTBF), led by Japanese billionaire Masayoshi Son, is ready to jump back on the offense after working this year to raise cash during the coronavirus pandemic.
After a string of embarrassing losses, Son forced the firm to hunker down. The company said last month that it had sold off nearly $100 billion in assets throughout the financial year, including $14 billion worth of 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 shares it had earlier purchased in tech firms like Amazon, Microsoft and Netflix. While those bets didn’t appear to pay off, they did signal that Son was ready to start taking risks again.
This month, SoftBank bought into another new venture, investing about $780 million into Sinch, a Swedish telecoms and cloud services provider.
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SoftBank has confirmed that it wants to use its SPAC to make a purchase. In a filing Monday with the US Securities and Exchange Commission, the new company said that it would look for a potential target somewhere “broadly across the technology landscape,” which could include anything from artificial intelligence and fintech to semiconductors and robotics.

It noted that it would not rule out the possibility of buying a company SoftBank has already invested in, saying that it was “not prohibited” from pursuing such a deal. In that event, the firm said it would consult an independent party to ensure that that “is fair to our company from a financial point of view.”

SPAC mania

SoftBank is the latest big name to hop on the SPAC bandwagon. So far in 2020, $75.4 billion has been raised through the IPOs of US-listed SPACs, according to data provider Refinitiv.

That’s a huge jump from 2019, when such firms only raised $13.1 billion.

A slew of major companies have recently chosen 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 gotten in on the action, too.
But some fear these deals are getting out of hand, and could be an ominous signal of misplaced market euphoria.
Tech stocks have also popped this year. The tech-heavy Nasdaq Composite (COMP), for example, has soared 42% so far in 2020.

SoftBank itself alluded to the momentum in its prospectus, saying it had been encouraged to join in after watching the space heat up.

“Over the last 18 months, we have seen significant growth in public market investors’ interest in top-quality companies operating in technology-enabled sectors,” the company said. “To that end, we believe launching a blank check company now gives us the opportunity to maximize value for our investors.”

Matt Egan and Charles Riley contributed to this report.

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