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WeWork Rebrands as SoftBank's Planned Investment is Radically Cut

By NexChange
FinTech, Financial Services

We already knew the two biggest outside investors in SoftBank’s $100-billion Vision Fund were opposed to a massive investment Chief Executive Masayoshi Son was planning to make in co-working startup WeWork, and now word comes that Son appears to have acquiesced and drastically cut the planned funding.

After the Vision Fund had initially planned to make a $16 billion investment to acquire WeWork, the Wall Street Journal reported that officials for the Saudi Arabia and Abu Dhabi wealth funds had “balked” at the acquisition, delivering a rare rejection of Son’s investments. And now the Financial Times (via TechCrunch) is reporting that SoftBank’s planned investment has now been drastically cut from $16 billion to $2 billion (though the company says it’s $6 billion).

Here’s some background on the investment, per TechCrunch:

Our sources say that, as of this writing, the $2 billion being discussed will be split evenly to purchase both primary and secondary shares from earlier investors. We’re also told that the company’s post-money valuation, assuming this newest deal is completed, will be $47 billion, a total that includes $1 billion that Softbank invested in WeWork last year via that convertible note and the $3 billion more than the SoftBank committed last year to invest in the company this year.

The New York City-based WeWork, which was founded in 2010 by Adam Neumann and Miguel McKelvey, has come under media scrutiny as it’s become one of the hottest startups in the world. With a valuation roughly about 20 times its projected annualized revenue, some have dismissed it as a traditional real estate play – and merely an office-leasing company at that – while masking itself as a tech company to win over investors.

In fact, the Journal reported that officials for the Saudi Arabia and Abu Dhabi wealth funds – which have $45 billion and $15 billion invested in the Vision Fund, respectively – “questioned the wisdom of doubling down on WeWork, and have cast doubt on its rich valuation,” seeing it as, yes, a real estate play, and both arguing that they already have plenty of real estate companies in their portfolios. As questions about the global economy persist and outlooks for the real estate market start to sour, there are concerns about how WeWork will fare during a recession.

In fact, the FT reports that WeWork’s losses in the first nine months of 2018 roughly quadrupled from 2017 to $1.2 billion, while its sales were at $1.5 billion during the same period. SoftBank currently owns about 20 percent of the startup.

WeWork’s Neumann has long been cagey about defining what industry the startup belongs to – refusing to call it a real estate company and not really a tech company, but some hybrid that’s hard to pin down. And so, it’s not surprising – especially given the fresh doubts about the real estate market – that WeWork just announced a rebranding, changing its name from WeWork to the We Company.

In a blog post, Neumann indicated that the We Company will encompass three business lines: WeWork (real estate), WeLive (its co-living spaces),  and WeGrow (education). In other words, the startup is trying to move away from being exclusively a real estate company (or at least change the perception of it being strictly a real estate play), with Neumann saying the company’s “guiding mission will be to elevate the world’s consciousness.”

Photo: STUART ISETT/Fortune Brainstorm TECH

 

 

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