May 19, 2022

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GM buys SoftBank's $2.1 billion stake in drive unit

GM buys SoftBank’s $2.1 billion stake in drive unit

GM also said Friday that it will invest another $1.35 billion in Cruise, to offset the amount SoftBank has pledged to invest in the startup once the company rolls out the vehicles into its ride-sharing business, something it is preparing to do.

The deal strengthens GM’s ownership and control of Cruise, and reflects a capital diversification move by former CEO Dan Amman, who was fired in December after pushing for an initial public offering. GM CEO Mary Barra and Cruise founder Kyle Vogt, who replaced Amman as CEO, said an initial public offering isn’t imminent right now and probably won’t be soon.

It’s a huge distraction, especially right now,” Vogt said on Twitter after GM announced the deal. “Cruise has just launched a self-driving service in San Francisco, and we want to focus 100% of our energy on expanding and delighting our customers. “

For SoftBank, the sale represents a good return on an investment of nearly four years. The fund initially set aside $2.25 billion for an 11% stake in Cruise in May 2018. The first $900 million will come immediately, with $1.35 billion paid out once the cars are ready for sale.

When Cruise began offering free rides to the public without a safe driver in late January, GM said on its fourth-quarter earnings call, it launched a second investment clause for SoftBank. SoftBank did not invest and General Motors bought its stake.

deceased banker
The managing partner at Vision Fund who championed the investment and many other transfer bets, former Goldman Sachs banker Michael Ronen, left two years ago. Since then, many of his portfolio companies have lacked an explicit attorney in the company.

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The investment fund has seen its tech investment drop by $25 billion, and the company is heavily indebted. But Vision Fund sold its stake in Cruise for more than double its initial investment. A SoftBank spokesman declined to comment.

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The SoftBank Group, like many investors, is suffering from declining values ​​of public equity and private companies in their final stages. The company borrowed against some of its investments to place more bets on startups, causing trouble for the company as its loan-to-value ratio rises and SoftBank founder Masayoshi Son’s fortune plummets. Cruise sales will help restore some balance.

Consolidation control
GM Cruise has other outside partners that still own 20%. These include Honda Motor Co., which is helping General Motors develop the Cruise Origin autonomous vehicle, Microsoft Corp., Walmart Inc. and T. Rowe Price Group Inc.

In lieu of an initial public offering, GM has also drawn up a plan to allow Cruise employees to give up their stakes in the company as an alternative to waiting for an initial public offering. The automaker launched what it calls a recurring liquidity opportunity program, which will pay existing employees for unlisted shares they want to sell at different times of the year.

“Public companies often have an advantage over private companies when bidding for candidates, as the equity stake in the offer is liquid,” Vogt said on Twitter. “But being a public company can be a pain. So today we are introducing Cruise RLO, our solution.”

GM said in its filing that employee stock awards total $4 billion and that it expects to allocate between $1 billion and $1.5 billion this year to the employee fund.

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Oman has been arguing internally that Cruise needs a public offering to attract and retain talent. Still, Barra wants to keep Cruz at home, at least until he achieves more with his self-driving technology and builds a revenue-generating company, people familiar with the matter said in December.

GM has changed little in the expanded trade. Shares are up 2.7% to $44.82 as of Friday’s close in New York.