WeWork pursues IPO despite SoftBank call for delay: report

September 11, 2019 11:00
WeWork may seek a US$15-18 billion valuation in an IPO, down from the US$47 billion value it commanded in a private fundraising round in January, according to a report. Photo: Reuters

Office-sharing startup WeWork is said to be pressing ahead with plans for an initial public offering despite calls by the firm's largest private investor, Japan's SoftBank Group, to delay the share sale due to valuation concerns.

The We Company, WeWork’s parent, may seek a valuation as low as US$15 billion to US$18 billion in an IPO, down from the US$47 billion value it commanded in the last private fundraising round in January, Reuters reports, citing sources familiar with the matter.

That means SoftBank, which has invested US$10.65 billion in WeWork since 2017 through its Vision Fund and other vehicles, will have to write down the value of its investment should the IPO go ahead.

Sources familiar with the situation cautioned that no final decisions have yet been made and the plans around valuation and timing of the IPO are all still subject to change, Reuters said.

The sharply lower valuation reflects concerns around the sustainability of We Company’s business model, which relies on a mix of long-term liabilities and short-term revenue, and how such a model would weather an economic downturn.

SoftBank chief Masayoshi Son and longtime lieutenant and group Vice Chairman Ron Fisher were in favor of the WeWork IPO until last week, even as others inside the group were pushing for a delay, one source told Reuters.

However, in recent days Son and Fisher have conceded internally that a delay might be in SoftBank’s best interests, according to the source.

Son and SoftBank have been pushing We Company CEO Adam Neumann to delay the IPO but have so far reportedly failed to persuade him.

Having burned through US$2.36 billion in cash in the first half of the year, WeWork requires a fresh injection of funds and is looking to raise US$3-4 billion in the IPO, Reuters has reported.

Adding to the importance of We Company going public is the US$6 billion in bank commitments it secured in August, which is dependent on it raising at least US$3 billion from the IPO.

Given its need for cash, a postponement of the IPO would be feasible if SoftBank would inject more cash into WeWork.

However, Son has so far been reluctant to invest more given how much his fund has already put in, according to Reuters sources.

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