Softbank Can Take Up Majority Stake In Loss Making Startup WeWork: Reports

Japan’s SoftBank Group Corp is potentially placing a large bet – and potentially its biggest one, on a loss-making startup – the U.S. shared office space provider WeWork Cos, and talks for the same is ongoing, according to media reports quoting sources with knowledge of the matter.

The reports however clarified that nothing about the deal is finalised as both the parties are yet to discuss about pricing and other details.

The reports also quoted a second source who reportedly confirmed about the ongoing talks and the potential of SoftBank taking up a majority share in WeWork.

According to an earlier report in the Wall Street Journal, the planned investment of SoftBank’s in the startup could be anywhere between $15 billion and $20 billion and the deal would probably be funded by SoftBank’s Vision Fund. The Journal reported in June that WeWork was valued at up to $40 billion earlier this year during deliberation about SoftBank making a smaller investment.

There were no comments available on the reports from WeWork and SoftBank.

SoftBank already has two members on the board of WeWork and the Japanese firm had made an investment $4.4 billion through its Vision Fund last year.

The fortunes of WeWork have been questioned by experts and investors of Silicon Valley who believe that the valuation of the company is over rated and it is actually a player in the real estate market and is very vulnerable to the ups and down of the property market. The second quarter results of the company saw mounting losses, according to the first ever public disclosure of its financial results in August.

The fall of about 5 per cent in the shares of SoftBank in Tokyo in the afternoon trading on Wednesday was attributed by some experts and analysts to the news of the potential WeWork investment which is being viewed to be negative for the Japanese firm. This is because this company has already made significant investments in the technology sector and the shares of this sector have been under pressure in recent times.

It SofBank takes up a majority ownership in WeWork, it would be a deviation from its established strategy of only taking up minority stakes in late stage start ups with high profiles.  The technology-focused Vision Fund was created by SoftBank with a seed capital of more than $93 billion.

Despite making investing billions of dollars in loss-making U.S. ride gaining firm Uber Technologies, SoftBank still owns only a minority stake in the company.

But the things are different between WeWork and SoftBank because they are closely connected as hundreds of SoftBank employees use space at the Japanese joint venture of the two companies and there have been reports that SoftBank might shift its headquarters into WeWork offices.

(Adapted from MoneyControl.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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