General Motors is expanding its ownership stake in self-driving car subsidiary Cruise.
The automaker said late Friday that is is acquiring SoftBank Vision Fund 1’s equity ownership in Cruise for $2.1 billion. GM is also making an additional $1.35 billion investment in Cruise, replacing a previous commitment made by the fund in 2018.
The announcement comes about six weeks after Cruise launched a limited driverless robotaxi service to the public in San Francisco, a milestone that prompted SoftBank to unlock its previously committed $1.35 billion investment.
Why SoftBank has decided to sell out now isn’t clear. A GM spokesperson said the company’s increased investment position not only simplifies Cruise’s shareholder structure, but also provides GM and Cruise maximum flexibility to pursue the most value-accretive path to commercializing and unlocking the full potential of AV technology.
GM CEO and Chair Mary Barra said the move will increase shareholder value.
“We are extremely pleased to announce GM is leveraging the strength of its balance sheet to capitalize on the opportunity to increase its equity investment in Cruise and advance our integrated autonomous vehicle strategy. We continue to believe our investment represents an extraordinary opportunity for creating long-term shareholder value,” Barra said in a statement. “Our increased investment position not only simplifies Cruise’s shareholder structure, but also provides GM and Cruise maximum flexibility to pursue the most value-accretive path to commercializing and unlocking the full potential of AV technology.”
GM’s increased stake could set the stage for the automaker to spin off Cruise, or even head to the public market. GM wouldn’t say if an IPO is in its short-term game plan. However, a GM spokesperson did say that as the company moves forward it will “consider all opportunities to create value for our shareholders.” GM has not ruled out a future IPO of Cruise, the spokesperson added.
In addition to GM’s increased investment, Cruise CEO Kyle Vogt announced it has launched a recurring liquidity opportunity program — another carrot in the bid to attract and retain talent. The program aims to give employees the liquidity and potential upside they might get from their company going public but without actually taking that step into IPO land, according to Vogt.
Under the program, current and former employees will be able to sell any amount of their vested equity each quarter. That equity is purchased by GM or others, according to Vogt. The value is determined by a third-party financial firm that will weigh company performance, financial projections, market conditions, relevant transactions and fundraising events, and market comps.
“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.