General Motors is increasing its stake in self-driving car subsidiary Cruise.
Late Friday, the automaker said it was acquiring Softbank Vision Fund 1’s stake in Cruise for $2.1 billion. GM is also investing an additional $1.35 billion in Cruise, replacing a previous commitment made by the fund in 2018.
The announcement comes about six weeks after Cruise launched a limited driverless robot taxi service in San Francisco, prompting Softbank to unlock its previously committed $1.35 billion investment.
Why Softbank decided to sell now is not clear. A GM spokesman said the company’s increased investment position not only simplifies Cruise’s shareholder structure, but also gives GM and Cruise maximum flexibility to choose the most profitable path to commercialize and unlock the full potential of AV technology.
GM CEO and Chairman Mary Barra said the move would boost shareholder value.
“We are very pleased to announce that GM is leveraging the strengths of its balance sheet to capitalize on the opportunity to increase its Cruise equity investment and advance our integrated autonomous vehicle strategy. We continue to believe that our investment represents an exceptional opportunity to create long-term shareholder value,” Barr said in a statement. “Our heightened investment position not only simplifies Cruise’s shareholder structure, but also provides GM and Cruise with maximum flexibility to choose the most profitable path to commercialize and unlock the full potential of AV technology.”
An increase in GM’s stake could set the stage for the automaker to spin off Cruise or even go public. GM did not say if the IPO is part of its short-term plan. However, a GM spokesman said that if the company moves forward, it will “look at every opportunity to create value for our shareholders. GM is not ruling out a future Cruise IPO, the spokesman added.
In addition to GM’s increased investment, Cruise CEO Kyle Vogt announced that he has launched a recurring liquidity opportunity program – another carrot in the quest to attract and retain talent. According to Vogt, the program aims to provide employees with the liquidity and potential growth they could get if their company goes public, but without actually going public.
Under the program, current and former employees will be able to sell any number of shares they own each quarter. That capital is being bought by GM or other companies, Vogt said. Value is determined by a third-party financial firm that evaluates the company’s performance, financial projections, market conditions, relevant transactions and fundraising activities, and market prices.
“We expect this value to grow as we continue to successfully deploy and scale our technology,” Vogt wrote in a blog post announcing the program.