Softbank Having Second Thoughts About the WeWork IPO

September 12, 2019 | Venture Capital
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SoftBank, a significant investor in WeWork, wants the shared workspace company to postpone its IPO

The WeWork IPO could cost Softbank investors a lot of money if trends continue.

And what a comedown we have witnessed. WeWork had a valuation of $47 billion earlier this year when SoftBank invested $2 billion. But investors are unlikely to give the company a valuation of more than $15 billion to $20 billion, sources said.

With advisers said to be testing investor appetite in that range, SoftBank is disappointed. It has invested over $10 billion in WeWork.

SoftBank’s $9.3 billion investment in Uber is underwater after the ride-hailing company’s stock fell 30% from its IPO price.

In case WeWork accepts SoftBank’s advice and puts off its IPO, it would not be eligible to draw loans worth $6 billion from a group of banks.

Investors wary of WeWork IPO

Investors have been upset by WeWork’s governance, complicated corporate structure, and a controversial payment to co-founder and CEO Adam Neumann.

Neumann has since returned the amount of $5.9 million that WeWork paid to him to use the trademarked word “we.”

Investors are also concerned that the company has a mismatch of tenures. It leases office space for a long period of as much as 15 years, but rents to tenants on shorter terms.

Moreover, WeWork’s business model remains untested by a recession or economic slowdown. It has already lost over $4 billion since 2016, though revenues have grown at a scorching pace.

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