SoftBank Will Launch A Blank Check Company — But WeWork Will Stay Private For Now

SoftBank Vision Fund leader Rajeev Misra said this week at the Milken Institute Global Conference he is preparing a special purpose acquisition company.

It is the latest high-profile SPAC, which is an increasingly popular investment vehicle used to take a company public through a reverse merger, and the first for SoftBank Group. The Tokyo-based investment conglomerate is known for big bets on tech-enabled startups in a variety of sectors including real estate, where it has funded coworking company WeWork and off-site construction company Katerra.

"It's part of an ongoing trend that we've seen, whether it be the banks or proprietary funds setting up SPACs," said New York law firm Loeb & Loeb Vice Chair Mitchell Nussbaum, who has helped clients set up hundreds of SPACs in the last two decades.

"It just makes a lot of sense. [SoftBank] has a lot of deal flow that they can bring into this, and the economics of setting up this vehicle are better for them," he said. "They have the ability to bring in the funds themselves into the vehicle and don't have to really retain a separate bank." 

SoftBank's SPAC will be operated by Vision Fund investment advisers and include capital from external investors and Vision Fund 2, CNBC reported this week, citing an unnamed source familiar with the matter.

SoftBank's intention isn't to acquire and take public an existing portfolio company, according to Axios, which also reports Goldman Sachs and Citigroup will manage the IPO process.

SoftBank technically could end up taking one of its portfolio companies public, but it would be difficult. It is also unlikely that any IPO-headed portfolio company would end up being WeWork, experts said. When forming a SPAC, companies aren't allowed to have a specific company in mind to buy, only investment parameters, according to Alexander Snyder, assistant portfolio manager for CenterSquare Investment Management.

"This could make it a thorny issue for SoftBank to take WeWork public via that vehicle," he told Bisnow. "A company they own tried to go public and failed, so they raise a SPAC with no pre-identified company in mind and just happen to pick their own investment to take public with it anyway? If you believe that, I have a Nigerian prince to introduce you to."

Another coworking company, Ucommune, which is focused on the Chinese market, went public through a SPAC in July, SPAC Analytics founder Neil Danics said. 

Also known as "blank check companies," SPACs have become more common both in finance as a whole and in commercial real estate specifically, Bisnow reported over the summer. In July, for instance, a SPAC named PropTech Acquisition Corp. acquired Porch, a real estate and home-improvement marketplace, after the former raised $172.5M in an IPO. That same month, a SPAC formed by Benchmark Real Estate Group, a New York-based real estate investment and management firm, filed for a $200M IPO to target a real estate services or proptech company

Overall, 2019 saw 59 SPAC IPOs, a figure eclipsed this year by August, Danics told Bisnow earlier this year. 

For SoftBank, a SPAC at least gives them yet another potential offering to make to future companies looking for an expedited way to go public, experts said.

"They'll probably try to do it with a pretty good company because [SoftBank is] always going to be aligned with them," Nussbaum said.

"SoftBank has a core competency in financial engineering," Horizon Partners Managing Director Sandy Kory, a Bay Area investment adviser, told Bisnow in an email. "And when it comes to tech they are a momentum player, so it makes sense that they are jumping into the SPAC market."

SoftBank CEO Masayoshi Son announced the company's second Vision Fund, which looks to invest $108B, last July. But it has struggled so far to attract investors after its big original Vision Fund bets like WeWork had valuations plummet. The first Vision Fund posted an $18B loss in 2019, but it did see a $2.8B investment gain in its last quarter. 

A SPAC will be a first for SoftBank's Son, who has steered a nearly unparalleled hundreds of billions of dollars in capital into companies like Alibaba and, more recently, Uber. 

Misra, who helped launch SoftBank's $100B first Vision Fund, said at the Milken Institute virtual event he will be disclosing more details on the new investment vehicle in the next two weeks.

SoftBank did not respond to a request for comment.