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Softbank Reportedly Planning To Invest $750 Million In WeWork IPO

WeWork CEO Adam Neumann

Photo by Noam Galai/Getty Images for TechCrunch

According to a report from the Wall Street Journal, Softbank, a major investor in WeWork, plans to buy at least $750 million worth of shares in WeWork's impending IPO, even amid reports of the company seeking a valuation as low as $10 billion for a public debut [a $10 billion figure would be lower than the $12.8 billion in equity and debt funding WeWork has raised since inception]. Softbank was previously reported to have pushed WeWork to postpone its IPO amid doubts and concerns over its cash burn rate and potential path to profitability. However, WeWork was reported to be going ahead with a public offering, even if it meant a value that's way lower than the $47 billion post-money valuation it got from a Softbank investment in January.

WeWork's push to go ahead with an IPO isn't surprising, given a $6 billion credit facility it has lined up that's contingent on it raising at least $3 billion from an IPO. However, there's no certainty there'll be enough investor demand to raise that amount, especially in light of WeWork's plight since it unveiled its IPO filing. After WeWork unveiled an S-1 filing that showed high losses, heavy lease obligations, and signals of conflict of interest originating from its CEO's financial interest in four commercial properties leased by the company, the New York-based company was met with criticisms doused with a little bit of lampoon from various individuals and news outlets outlike. Take a few examples: Forbes termed it the "most ridiculous IPO of 2019", The Verge termed it a "soap opera". NYU professor Scott Galloway termed it "WeWTF".

In light of recent happenings, WeWork made some adjustments to its corporate structure, including the appointment of a new board member, a reduction of CEO Adam Neumann's voting power [although he still retains majority control], and the elimination of a succession planning arrangement that involved Neumann's wife, Rebekah. The Wall Street Journal reports WeWork plans to begin its IPO roadshow next week ahead of a trading debut the week after that.

Softbank has a substantial amount at stake in WeWork's IPO, having already invested $10.65 billion in the company. The Japanese company, which invested out of its $100 billion Vision Fund, could be negatively affected by a disappointing WeWork IPO, considering its plan for a second $108 billion Vision Fund. Disappointing performance by a portfolio company, which it put nearly $11 billion into, would not spell good for potential investors in its second fund. To inflame such situation, Softbank's Vision Fund is already $600 million in the red from an earlier investment in Uber, which has fallen more than 20% from its IPO debut price.



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