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Soft Bank Reportedly Planning To Buy $750 Million WeWork Shares In Floundering IPO

Courtesy of ZeroHedge View original post here.

Soft Bank Reportedly Planning To Buy $750 Million WeWork Shares In Floundering IPO

Update: Having apparently decided that, since it can't stop CEO Adam Neumann from pressing ahead with his ill-fated IPO, it might as well do what it can to stanch the bleeding, Soft Bank is reportedly considering buying up to $750 million worth of WeWork shares in the offering – roughly one-fourth of the $3 billion WeWork is seeking to raise – to try and avoid, or at least delay, a massive on-paper loss.

Soft Bank is WeWork's biggest backer. During its last funding round, the Japanese telecoms giant with a VC arm valued WeWork at $47 billion. Reports published earlier today suggested that WeWork might accept a valuation as low as $10 billion simply to get the deal done, an alarming sign of just how badly the cash-burning startup – which has raised $12 billion so far – needs capital to keep on functioning.

SoftBank Group Corp. plans to buy at least $750 million of the shares in WeWork’s impending IPO, a move that could allow the office-sharing company to shore up an offering that has been plagued by tepid investor demand.

The Japanese technology conglomerate, already the biggest investor in WeWork’s parent, would end up with 25% or more of the shares sold in an offering that’s expected to raise at least $3 billion and value the startup at between $15 billion and $20 billion, according to people familiar with the matter.

That is significantly lower than the $47 billion valuation SoftBank bought in at earlier this year, reflecting skepticism over WeWork’s governance and ability to reverse steep losses.

The situation is still fluid, and there is no guarantee there will be enough overall demand to enable the company to pull off the beleaguered offering—or that it will achieve a valuation within the range that’s currently envisioned, some of the people said.

Of course, as WSJ notes, none of this is set in stone, and whether the company goes ahead with the IPO is still an open question. But as of late Friday, it appears that the offering is full steam ahead.

* * *

The We Company's underwriters must be having serious trouble securing orders for WeWork's planned IPO, because in what is at least the fourth reported downgrade to the company's valuation in less than 10 days, Reuters reports that the company might try to sell its shares with a valuation as low as $10 billion during the IPO, just one-fifth of the $47 billion from its last private fundraising round in January.

WeWork owner The We Company may seek a valuation in its upcoming initial public offering of between $10 billion and $12 billion, a dramatic discount to the $47 billion valuation it achieved in January, people familiar with the matter said on Friday.

In a scramble to save the offering (which the company's biggest private backer, Japan's Soft Bank, has reportedly turned against) WeWork offered a handful of marginal governance changes that would dilute the control of CEO and co-founder Adam Neumann in a modified prospectus released on Friday (we detailed those changes earlier here).

These changes included reducing the voting power of the Class B and C shares that company insiders like Neumann would exclusively control. Concerns about the company's governance have been cited by potential investors as one reason why they might balk at paying such a large premium for a company that has never turned a profit in its 9 years of existence, despite raising $12 billion in private venture backing. The company also revealed that it would debut on the Nasdaq (that is, if the IPO still happens).

As Reuters points out, this latest proposed valuation indicates that the company isn't confident that the governance changes it unveiled on Friday were substantial enough to assuage investors' concerns.

Of course, the post-IPO struggles of other unicorns including ride-share companies Uber and Lyft probably haven't helped whet the market's appetite for yet another unprofitable unicorn. Yesterday, SmileDirectClub tumbled 12% during its market debut, becoming the first company since the financial crisis to see its shares sink during its opening day after raising more than $1 billion in an IPO.

Once again, WeWork declined to comment on the latest speculation about its IPO valuation. And though the company appears to still be preparing for an IPO, Reuters anonymous sources cautioned that a decision about the offering valuation (and, presumably, whether the company will even proceed with the offering) has been made. The company is expected to begin its pre-IPO roadshow next week, with a possible offering coming the week of Sept. 23.

 


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