General Motors Co. (NYSE: GM) shares saw a solid gain on Thursday after it was announced that SoftBank Vision Fund would be making a sizable investment in the GM Cruise. Overall, SoftBank is investing $2.25 billion to further strengthen GM Cruise’s plans to commercialize AV technology at a large scale. Note that GM also will be investing $1.1 billion in this as well.
On the other hand, one car company is struggling on this news, and could really use the investment. Tesla Inc. (NASDAQ: TSLA) shares continue to slide, not only on this news but also closing out a disappointing month. Tesla is now facing even more problems regarding its Autopilot mode after another crash was reported this week, this time in California.
Back to the GM deal: the SoftBank Vision Fund investment will be made in two tranches. At the closing of the transaction, the Vision Fund will invest the first tranche of $900 million. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35 billion, subject to regulatory approval. Together, this will result in the SoftBank Vision Fund owning a 19.6% equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.
Michael Ronen, managing partner, SoftBank Investment Advisers, commented:
GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion. The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.
Shares of GM were last seen up over 10% at $41.86, with a consensus analyst price target of $47.52 and a 52-week trading range of $33.05 to $46.76.
Tesla shares were last seen down 2% at $286.01, with a consensus price target of $309.09 and a 52-week range of $244.59 to $389.61.