Sources: Cisco to Form SPAC to Buy Itself for $300B


By: R. Scott Raynovich

Technology bellwether Cisco (CSCO) is exploring plans to form a special purchase acquisition corporation (SPAC), which it would then use to buy itself for more than $300 billion or more, according to sources close to the company.

With Cisco trading at about $217 billion as of this morning, the markup would represent almost a 50% premium over the current share price. The key would be raising enough capital for the SPAC to complete the transaction, which shouldn’t be hard. Billions of dollars in SPAC money have been raised in the past few months to fund everything from self-driving cars to spaceships.

To raise the capital for the SPAC, Cisco is talking to a number of high-profile investors, including SoftBank and Elon Musk, say our sources. Those involved in the deal say that Cisco is targeting a capital raise of $1 trillion.

One source, speaking under anonymity, said that a SPAC would be attractive to many investors in the technology space. A SPAC of sufficient size would allow Cisco to use its considerable brand recognition to leverage the SPAC into a rollup that buys not just itself, but other legacy companies with stock prices that are languishing while GameStop shares go to the moon. For example, Cisco could also buy IBM and HPE with the money. IBM (IBM) recently traded with a $50 billion market cap and HPE (HPE) was worth only $20 billion -- while hot young public companies like Twilio (TWLO) trade at market caps in the stratosphere (Twilio is currently worth $60 billion).

“Think about it. With a $1T SPAC, HPE is chicken feed,” said an investment banking source in Greenwich, Conn., sitting on his yacht while drinking a gin and tonic and scrolling through Twitter messages. “This could make a lot of people rich.”

SoftBank Could be Involved

One analyst at a Wall St. firm with no specific knowledge of the deal said bringing SoftBank into the deal would get it done.

“With Masayoshi Son [SoftBanks’s CEO] involved, the deal would be a slam dunk,” said PJ Spantree, senior analyst with Ramumup Capital, based in Hoboken, New Jersey. “They could SPAC up and leverage their core competencies, perhaps do a rollup generating synergies using cloud security and a more scalable open-source business model. Think about building an AI-based machine-learning edge cloud architected with microservices and immutable APIs tied to the blockchain – integrate that with IBM’s Watson technology and HPE’s Greenlake, and you have something with real scale that could rival Snowflake, even though I have no idea what Snowflake actually does.”

In addition to providing significant capital to buy old, legacy technology companies that are losing market share on a daily basis, a SPAC would be attractive because the structure would have limited regulatory oversight, pretty much allowing Cisco to do anything it wants. Our Connecticut source told us that that Cisco CEO Chuck Robbins is possibly interested in buying the New York Jets football team as a “value play” to diversify the portfolio.

“That also makes sense,” said the investment banker. “Cisco, IBM, and the NY Jets have a lot in common.”

Four Gin and Tonics

The investment banking source, now on his fourth gin and tonic, thought the deal makes sense for everybody involved – including his own hedge fund, which has been holding a stagnant Cisco position for more than 20 years.

“Think about it - $1 trillion gets them there, and it’s only about half of the recent federal pandemic rescue package. This is a technology rescue package. They could roll up, revive, and integrate languishing, forgotten, and hated legacy technology companies all over the stock market. They really need help in these challenging times. It would represent huge stimulus for technology middle managers and hedge funds all over the planet. It’s a no-brainer, and I’m not just talking my book even though I have skin in the game. There aren’t any red flags. We would be monetizing the brand to retool for a cloud-native land grab. Cisco is only in the third inning of this scalable workaround. It’s a win-win. Let’s do this!”

When reached, Cisco Analyst Relations and Public Relations had no comment, as usual.

Actually, we didn’t reach out to them, because this story is an April Fool’s joke.