Real Estate

SoftBank in talks to invest $10bn in WeWork


Japan’s SoftBank and its Saudi Arabia-backed Vision Fund are in talks to invest a further $10bn into office space and co-working group WeWork, a deal that would provide fresh capital to the lossmaking business and delay a stock market listing.

Negotiations between US company WeWork and SoftBank’s Vision Fund have been going on for months and initially revolved around a smaller investment round led by SoftBank that would have valued the New York-based start-up at about $35bn-$40bn. 

People close to the matter said those discussions have shifted to talks about a much larger investment, which could reach as much as $10bn. The SoftBank investment would be phased over a two-year period, one of these people said. 

The valuation being discussed was not immediately clear, though one person added that SoftBank would seek to make the deal at a favourable valuation. People close to the matter said the investment discussions are serious but no deal is guaranteed. 

Shares in SoftBank fell 5.4 per cent on Wednesday in Tokyo trading, after the Wall Street Journal reported that the company was in talks to invest $15bn-$20bn to obtain a majority stake in WeWork. SoftBank and WeWork declined to comment. 

An investment would mark a significant expansion of SoftBank’s bet on WeWork, with the Japanese group and its $93bn Vision Fund having agreed to place $4.4bn into the company last year at a $20bn valuation.

Depending on the investment size, SoftBank would control a large minority stake in WeWork and may even gain control of more than half of the company’s equity. 

It would also delay discussions over a potential listing of WeWork. One person close to the company said that WeWork has been receiving pitches from investment bankers about a deal to go public as soon as late next year. 

Meanwhile, WeWork’s net losses continue to grow as it focuses instead on aggressive overseas expansion and the acquisition of new properties and leaseholds. In the first half of 2018, losses at WeWork rose more than fourfold from the same period a year ago to $723m. 

Its rapid pace of expansion has raised concerns about the company’s frothy valuation as WeWork grapples with a jump in costs and large fixed investments in office buildings. 

The negotiations on the SoftBank side are being led by Ron Fisher, vice-chairman of the Japanese group and one of a handful of executives who have worked by the side of SoftBank’s founder Masayoshi Son over the past two decades. 

Mr Fisher and Mark Schwartz, a former Goldman Sachs executive who is also on the SoftBank board, became WeWork directors last year as part of the $4.4bn investment. 

For SoftBank, an investment of a near majority stake in WeWork would mark a departure from Mr Son’s strategy of taking 20-30 per cent stakes in technology start-ups through the Vision Fund without the Japanese group itself having to manage the individual companies. 

Mr Son has also positioned the WeWork investment as a test case for the benefits that portfolio companies can derive from being part of the bigger SoftBank group beyond the capital generated by the Vision Fund.

WeWork formed a joint venture with SoftBank to enter the Japanese market last summer and has expanded rapidly by tapping into the vast client network that the telecoms group has in its home market. SoftBank has also invested in a WeWork subsidiary in China, a new growth market for WeWork as its market in the US matures.



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