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30 September 2019

Successful Vivint smart home venture merged into Softbank empire

Vivint Smart Home has announced that it is merging with Mosaic Acquisition, itself an investment vehicle formed by Mosaic Sponsor and Softbank subsidiary Fortress Investment Group. Softbank is wrapping itself up in a complex transaction, but one which does at least paint a good picture for the smart home sector.

After the deal, Mosaic Acquisition will be changing its name to Vivint Smart Home, and claims the new entity will have an enterprise value of $5.6bn, a market cap of $3.1bn, annual revenues of $1.3bn and adjusted EBITDA of $530m.

Vivint will use proceeds from the transaction to pay off debt and then “position the company to further capitalize on growth initiatives”. Vivint itself was acquired by the Blackstone Group for $2bn in 2012, and Blackstone was reportedly looking for a $6bn buyer in 2017.

Vivint currently has 1.5m subscribers in the USA and Canada, offering hardware, software, and most importantly accompanying services. The smart home-as-a-service offering has proven popular among its customers, and as a platform, looks very solid.

Third party integrations include Amazon’s Echo and Google’s Home ecosystems, as well as a plethora of other well-known brands. Vivint Smart Home also gave birth to Vivint Solar. Founded in 2011, the wing went public in 2014, and is currently second-placed in the US solar market – after Tesla’s decline.

Todd Pedersen, founder and CEO of Vivint, said: “We are excited to partner with Mosaic to unlock the next chapter of the Vivint growth story. We remain committed to our mission of redefining the home experience through intelligently designed, cloud-enabled solutions delivered to every home by people who care. Just as it was in 1999 when I founded this business, to today where we are a multi-billion-dollar enterprise, our customers remain our focus. As the smart home market rapidly expands globally, Vivint is in the early stage of a massive opportunity and is ready to create the future of how we live and interact with our homes.”

Softbank’s investment prowess is beginning to be questioned in the mainstream press. Recent problems over the WeWork shared office space venture, and the Uber IPO valuation, has led many to question the veracity of the first, $97bn Vision Fund. Some 80 companies have received investments from the project, but with WeWork and Uber among the most high profile, the brand has taken a bit of a battering.

For companies that received investments from the Vision Fund that have actually completed the IPO, Uber is down around 30% from the filing price, with Slack down around 25%. Of the six total that have filed, only Guardant Health and 10X Genomics are above the IPO price.

According to the Financial Times’ digging, the public statements from the Vision Fund say that things are going well – posting a net return of 29%. With Softbank having invested $33bn, the majority of the rest of the fund stems from Saudi Arabian ($45bn) and United Arab Emirates ($15bn) government investments and a few far smaller stakes.

As returns from the first fund are meant to pay for Softbank’s stake in the second fund, the Japanese group’s shares have taken a battering, down around 26.5% last week from their 52-week high. Its 26% stake in Alibaba could be a savior, but offloading something worth $101bn is not exactly an easy task.