(Bloomberg) — Fair Financial Corp., a startup car-leasing company backed by SoftBank Group Corp.’s Vision Fund, is selling a chunk of its assets to San Francisco-based Shift Technologies Inc. The outcome is a money-losing one for SoftBank.
Shift will pay $15 million in cash and enter into an equity transaction worth about $4.2 million at today’s stock price to purchase Fair’s dealer-listing technology. The stock component is 2.5% of Shift’s outstanding shares at the time of closing, expected in the second quarter of 2022, the company said in a letter to shareholders Tuesday.
The transaction will be fully funded by a $20 million senior unsecured debt facility with a 6% coupon from SoftBank Group, Shift said in the letter.
“The synergies are fantastic,” Shift Chief Executive Officer George Arison said in a phone interview. Acquiring software and other assets from Fair will allow Shift to launch a third-party marketplace for cars in the second quarter of this year, far ahead of schedule, Arison said.
The marketplace will let dealers and independent sellers list their cars alongside Shift’s own inventory, much as independent sellers can list their wares on Amazon.com. Fair CEO Brad Stewart said that the combination of owned inventory and third-party inventory “should be a winner.”
SoftBank, however, is not a winner in the deal. The Japanese conglomerate first invested in Fair in 2017, deploying $30 million from SoftBank Group and another $300 million in a round led by the Vision Fund the following year. SoftBank eventually bought Fair’s debt of around $300 million from Greensill Capital, a company in the Vision Fund’s portfolio that collapsed last year.
SoftBank had owned about a third of Fair’s equity, which has been wiped out, according to Stewart. A spokesman for SoftBank declined to comment on Fair. SoftBank will derive some benefit from Fair’s remaining assets—largely its fleet business—but not enough to compensate for the money it poured into the company. Fair’s additional venture backers include BMW i Ventures, Javelin Venture Partners and Next47.
In separate transactions with other parties for an undisclosed price, Fair is selling that fleet business and its existing contracts with drivers, Stewart said. Those transactions have not yet closed. Fair also has cash, less than $75 million, Stewart said. All cash and proceeds from the asset sales will be used to repay part of SoftBank’s debt, he said.
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