Venture Capital: SoftBank’s Vision Fund Planning A SPAC
A SPAC is a special-purpose-acquisition-company. It’s also known as a “blank check” company.
SoftBank Vision Fund chief Rajeev Misra said during the 2020 Milken Institute Global Conference on Monday that the Fund is planning a special purpose acquisition company (SPAC). These entities the latest craze in the stock market, and 80 of them have raised more than $32 billion in the third quarter of 2020. That amount is up 4X from the second quarter. According to CNBC, the Vision Fund’s plans around its SPAC are likely to firm up in the next two weeks.
Vision Fund SPAC
CNBC cited a source to say that the proposed blank check company will be run by SoftBank Vision Fund investment advisors. It will source funds both from the Vision Fund 2 as well as outside investors.
The SPAC will use the funds to acquire a suitable private target company. The latter thereafter achieves a publicly listed status.
This is a faster, easier, and inexpensive route to going public compared to an IPO.
According to Axios, Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C) would manage the IPO process of the Vision Fund’s SPAC. The new entity does not intend to acquire any startup in the Vision Fund’s existing portfolio.
Notably, Opendoor, a company backed by the SoftBank Vision Fund, recently agreed to be acquired by a blank check company.
Why VCs are launching “blank check” companies
Amish Jani, the co-founder of FirstMark Capital told TechCrunch that venture capitalists are increasingly floating these entities because “a couple of threads are coming together.”
The first was that SPACs were doing very well and private companies’ stocks, e.g. Draftkings (NASDAQ: DKNG) had done spectacularly after merging with a SPAC.
Secondly, Jani said that private companies were able to raise huge sums of capital over the past five or six years and had delayed their IPOs substantially.
Now there are tens of billions of dollars in value sitting in the private markets, Jani observed; SPACs offered an opportunity to go public and build trust with public shareholders by leveraging the early tailwinds of growth.
Meanwhile, Bloomberg quoted Scott Minerd, chairman of investments and global chief investment officer at Guggenheim Partners, at the Milken conference as follows:
“The SPAC as a vehicle, I think, is ultimately going to be transformative for the capital markets.”
Related Story: Blank Check Company Raises $230M In SPAC IPO
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