GM Soars After Soft Bank Invests $2.25BN In Its Driverless-Car Unit

Step aside Tesla and Uber: there is a new-selfdriving cool kid in town.

On Thursday morning, tech-investing giant SoftBank Vision Fund, which over the past year has been spending money like the Swiss National Bank buying US stocks on tilt, announced it would will invest $2.25 billion in General Motors Co.’s driverless-car unit valuing it at $11.5 billion, creating a new start in the ongoing fierce battle by tech companies and startups to become the first to commercialize autonomous vehicles.

SoftBank Vision Fund will take a 19.6% stake in GM Cruise Holding

GM said that the fund, an affiliate of Japan’s SoftBank Group, will take a 19.6% stake in GM Cruise Holdings LLC, a newly formed entity primarily made up of Cruise Automation, the driverless-car developer that GM acquired in early 2016 for around $1 billion.

The Vision Fund’s investment will be staggered, coming in two tranches: an initial $900 million payment, and another of $1.35 billion once Cruise’s autonomous vehicles are ready for commercial deployment.

The deal will provide not only a major financial backer - a la what Uber tried to do with Warren Buffett and failed - but will also "afford GM increased flexibility with respect to capital allocation" as it plows more money into developing a network of autonomous ride-share vehicles, targeted for sometime next year, GM said.

Opening the Cruise subsidiary to SoftBank’s giant fund allows it to access capital that investors have been reluctant to grant the 110-year-old auto maker. GM will retain an 80.4% stake in GM Cruise and invest $1.1 billion in the business.

During a press conference Thursday morning, GM Chief Executive Mary Barra called it a “landmark” investment that gives GM Cruise the capital it needs to get its driverless-car business to market

The biggest winners from today's announcement are GM shareholders like David Einhorm who finally get to see a major vote of confidence in their investment. For years, GM’s shares have languished as valuations for upstarts like electric-car maker Tesla and ride-share firm Uber soared on expectations of heady growth. GM stock surged over 10% in the pre-market.