SoftBank asks WeWork to shelve IPO due to Vision Fund 2 worries

10 Sep 2019180 Views

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WeWork's office space in Sanlitun, Beijing. Image: WeWork

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WeWork’s IPO saga continues, with reports that SoftBank is urging WeWork to shelve the public offering to protect its Vision Fund 2.

On Monday (9 September), Bloomberg reported that SoftBank has been urging WeWork to postpone its contentious initial public offering (IPO).

Last week, it emerged that co-working giant WeWork could be planning to delay the move. Now, it is reported that SoftBank, which is the biggest shareholder in WeWork, does not want the loss-making company to go ahead with its eagerly anticipated IPO at all, amid speculation that the company is set to slash its valuation from $47bn to $20bn.

To date, SoftBank and its Saudi-backed Vision Fund have invested at least $10bn in WeWork.

Last week, it was also reported that WeWork CEO Adam Neumann was in talks with SoftBank’s CEO, Masayoshi Son, to secure more funding ahead of the IPO.

Second Vision Fund

In August, The Wall Street Journal reported that SoftBank was planning to launch a second VC fund, entitled Vision Fund 2, which would start spending within the next few months.

It is now thought that SoftBank wants to prevent the WeWork IPO from going ahead, as it could hurt the firm’s ability to raise for its second Vision Fund. If WeWork’s public valuation is much lower than its private market valuation, this could dissuade investors from trusting Vision Fund 2.

The Financial Times said that the Japanese group “could face challenges raising that sum if the We Company were to list at a steep discount to its last funding round”.

Recent headlines relating to Uber, which has also received investment from SoftBank, likely haven’t helped WeWork’s case, either.

However, if the We Company pulls out of the IPO, it will lose access to a $6bn loan from JPMorgan Chase and Goldman Sachs, which was offered on the basis of the listing raising at least $3bn in new investment.

Doubts

WeWork’s reduced valuation may be even lower than predicted last week, with the Financial Times reporting that WeWork’s parent company, The We Company, was testing investor appetite at a valuation between $15bn and $20bn.

NYU professor Scott Galloway, who has been avidly commentating on WeWork as it battles criticism about its public offering, has remained certain that this IPO will not go ahead.

In his most recent blogpost, Galloway, who recently nicknamed the company ‘WeWTF’, predicted: “Within 30 days – on a Friday or under cover of another big story – WeWTF announces it’s shelving its IPO due to market conditions or some such.”

WeWork has declined comment, citing mandatory restrictions on communications ahead of an IPO. SoftBank has also not made any comment.

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com