Softbank downsizes with a ‘Spac’

Japanese conglomerate SoftBank Group is attempting to take advantage of investor appetite for both special-purpose acquisition companies (Spacs) and technology shares, says Tim Culpan on Bloomberg. 

The Spac will comprise money from public investors, SoftBank’s flagship Vision Fund and funds from selling additional debt. The resulting pool of capital can then be used to buy private companies. The new vehicle will mark the first time that private investors will be allowed to participate directly in SoftBank’s venture capital investments; they won’t be obliged to suffer “a massive conglomerate discount” by investing in the wider company.

“Nothing screams ‘bubble’ in the technology sector louder than a SoftBank Vision Fund Spac,” says Liam Proud for Breakingviews. But SoftBank’s decision to explore this route is also a mark of the company’s “waning influence”. Even if things go well, the new company is expected to raise a maximum of $500m, a fraction of the nearly $100bn received from investors in the original Vision Fund, most of which came from sovereign-wealth funds. Chasing public money to launch a Spac represents a “humble downsize”, for a company that has previously used “Gulf billions” to “reshape whole industries”.

Investors should also beware, says Lex in the Financial Times. The simplified listing around Spacs typically leads to “lower levels of scrutiny”, with one recent study suggesting that Spacs’ returns have lagged the market over the last two years. This is a particular concern given SoftBank’s “history of opaque trades and governance”.