General Motors Co (GM) has bought out the Softbank Vision Fund’s stake in self-driving vehicle start-up Cruise LLC for US$2.1 billion, ending the Japanese investment firm’s involvement in the business and giving the Detroit, Michigan, automaker 80 percent ownership.
GM on Friday said it would invest another US$1.35 billion in Cruise, which makes up for the amount Softbank had pledged to invest in the start-up once the company deploys vehicles in a planned ride-sharing business.
The deal consolidates GM’s ownership and control over Cruise, and reverses a capital diversification plan by former Cruise CEO Dan Ammann, who was fired in December last year after pushing for an initial public offering (IPO).
Photo: Bloomberg
GM CEO Mary Barra and Cruise founder Kyle Vogt, who replaced Ammann as CEO, have said an IPO is not in the offing at this time and would likely not be any time soon.
“Why not just go public? It’s a major distraction, especially right now,” Vogt wrote on Twitter after GM announced the deal. “Cruise just launched a driverless ride hail service in SF [San Francisco], and we want 100 percent of our energy focused on scaling up and delighting our customers.”
For Softbank, the sale marks a nice return on a nearly four-year investment.
The fund initially committed US$2.25 billion for an 11 percent stake in Cruise in May 2018. The first US$900 million was to come at once, with US$1.35 billion payable once vehicles were ready for commercialization.
SoftBank subsequently contributed about US$300 million in additional funding.
When Cruise started offering free rides to the public without a safety driver in late January, it triggered Softbank’s second investment requirement, GM said on its fourth-quarter earnings call.
Softbank did not make the investment, and GM bought out its stake.
The Vision Fund has seen the value of its technology investments plunge by US$25 billion, and the company is heavily in debt.
However, the investment fund sold its Cruise stake for more than double its initial investment.
A Softbank spokesman declined to comment.
Cruise has other partners that own a combined 20 percent stake.
They include Honda Motor Co, which is helping GM develop the Cruise Origin autonomous vehicle, Microsoft Corp, Walmart Inc and T. Rowe Price Group Inc.
In lieu of an IPO, GM also set up a plan to allow Cruise employees to cash out of their stakes.
The automaker launched what it calls the Recurring Liquidity Opportunity (RLO) program, which would pay existing employees for unlisted shares they want to sell at various times throughout the year.
“Public co’s typically have the upper hand vs private co’s when making offers to candidates, since the equity part of an offer is liquid,” Vogt wrote on Twitter. “But being a public co can be a pain. So today we introduced Cruise’s RLO, our solution.”
GM said in its filing that the total equity awards held by employees are worth US$4 billion and that it expects to set aside US$1 billion to US$1.5 billion this year for the employee fund.
Ammann had said in internal memos that Cruise needed an IPO to lure and retain talent.
However, Barra wants to keep Cruise in house — at least until it reaches further milestones with its self-driving technology and develops a business that brings in revenue, people familiar with the matter said in December last year.
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