Report: SoftBank Will File For SPAC

SoftBank on Monday (Dec. 21) is planning to file for a special purpose acquisition company (SPAC) to raise as much as $600 million through an initial public offering (IPO), Axios reported.

Moreover, Axios reported, SoftBank is moving toward creating additional SPACs.

Companies or investment groups create SPACs to raise money through the sale of stakes to either the public or entities such as private equity funds. A SPAC then uses the funds to purchase an existing company. SPACs themselves have no business operations.

SPACs are controversial, in part because investors ostensibly don’t know what business the funds they contribute to will be used to acquire.

A SoftBank spokesman declined comment, Axios reported.

SoftBank hasn’t previously used SPACs, according to Axios.

The fundraise to be initiated Monday, Axios reported, will be used to acquire a company in which SoftBank currently doesn’t have a stake. Bankers involved are from Citigroup and Goldman Sachs.

After Axios reported SoftBank’s plans for Monday, Bloomberg noted that the head of the SoftBank fund that will oversee the new investments told the news service in October that details of plans for the SPAC would be announced “within two weeks.” Bloomberg said the reason for the delay was unknown.

In September, SoftBank was considering taking itself private after asset sales and other moves failed to deliver a desired market valuation.

SPAC-Insider reported that 242 SPACs have been formed in the U.S. in 2020, compared with only 59 in all of 2019 and significantly fewer in prior years.

SPACs have a fixed shelf-life — usually two years — after which their sponsors must return any money raised to investors. The strategy’s big risk is that an acquisition company will be created, but suitable acquisition targets won’t emerge.