By: Ilana Siyance
WeWork, the super charged startup which provides shared workspaces for businesses, may be starting to feel the brakes in its growth. Its much anticipated IPO is now expected to fetch a much lower valuation than previously thought. This is especially news to Japan’s SoftBank Group Corp, who has already invested $10.65 billion into the co-working space startup, which was founded in 2010. As reported by The LA Times, SoftBank, which is known as the as the 36th largest public company in the world, owns about 29% stake in We Co., WeWork’s parent. Despite the startup’s exponential growth and support and confidence from the Tokyo’s multinational conglomerate, WeWork has yet to turn a profit. Wall Street is fully cognizant that last year, the company lost roughly $1.61 billion.
Wework’s looming IPO is slated to become a measure not only of the company’s true standing value, but also SoftBank and its $100-billion Vision Fund’s investment style. The holding company, which lauds itself for unrivaled innovation, has become known for making big bets on promising but financially unproven companies. When SoftBank invested in New York-based WeWork earlier this year, it did so based on a valuation of $47 billion. Now, Wall Street is slashing that valuation to less than half, setting the company’s IPO at $20 billion to $30 billion. The outcome of WeWork’s initial public offering will not only affect the company, but will likely be considered a barometer for SoftBank’s aptitude and subsequently influence its ability to raise capital for future ventures. WeWork is by far the largest of SoftBank’s real estate investments.
To make matters worse for SoftBank, it is simultaneously trying to persuade investors to bankroll a second, $108-billion iteration of its Vision Fund. SoftBank is also still reeling from a bad IPO—it has $7.7 billion invested in Uber whose shares price has plummeted from $45 in May to about $35, or well below the price SoftBank paid for part of its stake.
“The other shareholders, they try to create clean, polished little companies,” SoftBank founder Masayoshi Son said, last year defending the company’s bold strategy. “And I say: ‘Let’s go rough. We don’t need to polish. We don’t need efficiency right now. Let’s make a big fight. Let’s make a big, successful — a big win.’ Son, 62, has led the Vision Fund with ideals of altering the course of history by funding potentially world-changing companies, and that oftentimes entail greater risk. Softbank’s Vision Fund is currently the world’s biggest technology-focused venture capital fund.
