GM Seeking Potential IPO for its Self-Driving Unit Cruise

author: Paul Young   

In order to jumpstart the company's development of autonomous driving technology, General Motors purchased San Francisco-based autonomous driving startup Cruise Automation in 2016 for nearly $1 billion. Now, GM is exploring its options, including an IPO, for the self-driving arm.

As reported by Bloomberg last week, General Motors is having early discussions both internally and with banks about various strategic options for its self-driving car unit GM Cruise LLC, according to people familiar with the matter.

The options for Cruise include a public stake sale and a tracking stock. Before a decision is made, GM first wants to position the business for commercial success. Deciding on a public-market future for Cruise is notable after SoftBank Group Corp.'s massive $2.25 billion investment in Cruise.

SoftBank's fund is putting an initial $900 million into Cruise this year, followed by $1.35 billion once its autonomous vehicles are ready for business use. The fund will own 19.6 percent of Cruise once the entire investment is completed.

If the unit doesn't have an IPO, spinoff, sale or dissolution within seven years of closing the SoftBank investment, the fund may convert its stake into GM common stock, according to a regulatory filing.

"SoftBank's investment is a huge mile marker for them in this process," John Murphy, auto analyst for Bank of America Merrill Lynch, said last Thursday in a speech in Detroit. "GM is way out in the lead" on autonomous vehicles.

GM is not expected to make a decision until Cruise is further along in development and may not take any action for a couple of years, if at all.

GM acquired Cruise in 2016 for $581 million in cash. However, the value of the deal is actually closer to $1 billion when adding in incentives for key talent including Cruise CEO Kyle Vogt.

GM is exploring a self-driving robotaxi service beginning in 2019 using a fleet of Chevy Bolt EVs outfitted for autonomous driving by Cruise. The cars are being tested by Cruise in San Francisco, Phoenix and near Detroit.

Lately, automakers are reaching out to tech companies for help with autonomous driving technology. In addition to GM acquiring Cruise, Ford invested $1 billion in self-driving startup Argo AI last year. German luxury carmaker BMW is working with Intel and computer vision startup Mobileye on systems for autonomous driving. Last year in a separate deal, Intel bought Mobileye for $15 billion.

Paul Young