SoftBank’s Vision Fund is raising $604 million for a SPAC (AKA blank-check companies), the Wall Street Journal first reported. These publicly traded cash shells are formed with the sole purpose of taking over a yet-to-be-named operating company. SPACs have been one of the hottest asset classes of 2020, with 234 U.S. IPOs raising $81 billion this year.
- WeWork debacle turned off spigot: The plan could open up a new funding channel for some of the Japanese conglomerate’s more unorthodox investment ideas. SoftBank failed to attract outside investors for the second Vision Fund after WeWork’s failed IPO.
- Be Smart: iBuyer OpenDoor made its Nasdaq debut this Monday through Social Capital’s SPAC. The modernized house flipper now boasts a market cap over $16 billion. iBuying is built around the premise that many people who want to sell their homes will be willing to accept a smaller profit if offered a quick transaction that allows them to avoid hiring a broker.
- Vision Fund II was a fantasy –– so Masa taps public markets: He even admitted in May 2020 that has given up on the idea of trying to get money from outside investors. “Sometimes I get asked if the funding for Vision Fund 2 is OK…It’s not,” he said.
- Daily Beat will do the due diligence for you: Potential retail investors in its SPAC, SVF Investment Corp ($SVFA) must understand the history of the vehicle. The Vision Fund recorded staggering losses after writing down WeWork’s valuation to $2.9 billion, down more than 90% from its $47 billion peak. SoftBank has invested more than $10 billion in WeWork.
- WeWork wasn’t even a tech company: It’s a co-working company without any technology. He simply had to do some due diligence into IWG (Regus), the office darling of the dot-com era. When the downturn came, tenants dried up and the company had no way to pay for its ‘debt-like’ leases. It filed for Chapter 11 bankruptcy protection in the U.S. and retained its U.K. stock-market listing.
- Most damning of all: Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala –– two of the largest investors in the Vision Fund -––didn’t approve SoftBank’s proposed $16 billion additional investment into WeWork before the IPO. If it weren’t for Mohammed bin Salman and Mohammed bin Zayed Al Nahyan, SoftBank would have invested a total of $25 Billion in the failed venture. Buyer beware. [WSJ+Reuters+Bloomberg]