SoftBank urges WeWork to shelve IPO

Galtero Lara
Setiembre 11, 2019

A sharp cut to WeWork's valuation would be a blow to SoftBank as at a time when it is seeking funds from investors for a second Vision Fund, for which it says $108 billion in pledges have been secured.

SoftBank made a follow-up investment in We Company, one of its biggest tech bets, at a $47 billion valuation earlier this year - a number widely treated with scepticism by analysts. Last Wednesday, Rennaisance Capital co-founder and chairwoman Kathleen Smith told CNBC that the poor IPO performances of Uber and Lyft-especially given the similar unprofitable natures of their business models-could reflect directly on the We Company's public debut.

The newspaper's website said that, despite plans to begin a roadshow to market the shares to new investors as early as Monday, We Company and its underwriters are planning to hold meetings this week among themselves and with investors to figure out what changes may be needed to help garner enough demand for an IPO, according to people familiar with the matter. Through its first fund, SoftBank has now invested 10 billion dollars in the lessor of office spaces, of which 2 billion dollars this year.

Such a low valuation could be a boon to investors.

WeWork planned to raise $3 billion to $4 billion by going public and secure another $6 billion in debt contingent on its IPO raising at least $3 billion, The Journal said. That followed weak initial trading at other startups including SoftBank-backed Uber Technologies Inc.

The company lost US$1.9 billion past year with revenue of US$1.8 billion.

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However, in recent days Son and Fisher have now conceded privately that a delay might be in SoftBank's best interests, the source added.

SoftBank is pressing WeWork to postpone the stock offering after investors expressed serious concerns about the business and its corporate governance, said the people, who asked not to be identified because the discussions are private.

The valuation for the money-losing USA office-sharing startup could be as low as $15 billion-$18 billion, one of the sources with direct knowledge of the matter said.

The company rents office space for the long-term, subletting that space to firms and individuals on more flexible lease terms.

SoftBank says many investments receive a vote of confidence as third parties come in as co-investors or by making follow-on investments at the same or higher valuations.

If a tech company shelves an IPO due to a lower valuation than expected, investors are generally expected to take that fall into account when appraising their stakes.

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