WeWork IPO valuation likely below $20b., clouding SoftBank’s vision
WeWork owner The We Company is considering slashing the valuation of its planned stock market launch to below $20b., two people familiar with the matter said, the latest blow to leading tech investor SoftBank Group after limp flotations of Uber and Slack .
Having previously hoped to be in a position to begin its roadshow to pitch the initial public offering (IPO) to investors as early as this week, We Company may now wait until Monday of next week, one source also said.
The valuation for the money-losing US office-sharing start-up could be as low as $15 billion.-$18b., one of the sources with direct knowledge of the matter said, roughly a third of the $47b. We Company was valued at when SoftBank made a follow-on investment in the company.
The other source said the valuation was unlikely to be as low as that and both cautioned that no final decisions have yet been made and the plans around valuation and timing were all still subject to change.
SoftBank, whose $100b. Vision Fund is widely seen as having contributed to frothy tech valuations, has urged We Company to shelve the IPO due to tepid investor demand, the Financial Times reported.
However, having burned through $2.36b. in cash in the first half of the year, We Company requires a fresh injection of funds and SoftBank has so far been reluctant to invest further given it has already put in more than $10b. since 2017.
Given that, We Company “may have no choice but to push ahead with the IPO at a much lower than anticipated valuation,” one of the sources said.
Adding to the importance of We Company going public is the $6b. in bank commitments it secured in August which is dependent on it raising at least $3b. from the IPO or direct investors like SoftBank.
The sources requested anonymity because the matter is private. SoftBank declined to comment. We Company also declined to comment during the quiet period ahead of the IPO.
We Company’s planned listing follows weak initial trading at other start-ups including Uber Technologies Inc and Slack Technologies Inc, both backed by SoftBank.
While SoftBank and its Vision Fund emphasize their long-term investing credentials, founder and CEO Masayoshi Son has set out an ambitious IPO pipeline for tech investments spanning ride-hailing, fintech and health startups.
Putting We Company’s offering on hold would disrupt that schedule at a time when SoftBank is seeking funds from investors for a second Vision Fund, for which it says $108b. in pledges have been secured.
WeWork, which rebranded as the We Company earlier this year, has emerged as one of SoftBank’s biggest bets.
Son and long-time lieutenant and group Vice Chairman Ron Fisher were in favor of the IPO until last week, even as others inside the group were pushing for a delay, one source said.
However, in recent days Son and Fisher have now conceded privately that a delay might be in SoftBank’s best interests, the source added.
Other sources stressed the situation was still in flux.
Sanford C. Bernstein analyst Chris Lane said that if WeWork halted its IPO, SoftBank could come up with an alternative funding plan for the start-up, which he estimates needs $9b. in funding to become cash-flow positive.
SoftBank “have got an important voice, but more importantly they have money... [We Company] will have to listen to them,” said Lane, who values the office space-sharing firm at $23b.
(Reuters)