Softbank pushes Wework to postpone IPO, sources say

SAN FRANCISCO Executives of Wework and its largest investor, Softbank, are discussing whether to shelve plans for an initial public offering of the money-losing co-working company, said people with knowledge of the talks.

Softbank is pressing Wework to postpone the stock offering after investors expressed serious concerns about the business and its corporate governance, said the people, who asked not to be identified because the discussions are private. Wework, which owns or leases office space and then rents it to companies typically needing short-term space, had planned to hold a roadshow to promote the offering as soon as this week, an executive told analysts last week.

Representatives for Softbank and The We Company, the parent of Wework, declined to comment.

In the span of a few months, Wework has gone from one of America’s most valuable unicorn startups to a punchline in investment circles. Early this year, Goldman Sachs Group Inc. pitched Wework as a Us$65-billion business.

But when the company filed a preliminary prospectus last month it revealed the company had racked up billions in losses, was burning cash and had an arcane corporate structure riddled with potential conflicts. In just the first six months of 2019, Wework lost US$690 million, bringing its total losses to almost US$3 billion in the past three years, the filing showed. Now Wework advisers are estimating the company is worth less than a third of Goldman’s figure.

Japanese conglomerate Softbank Group Corp. and its affiliates hold about 29 per cent of Wework stock, Bloomberg reported. That’s even more than co-founder and chief executive Adam Neumann, though he maintains effective voting control through a three-class share structure. Softbank has invested a total of about US$10.65 billion into the New York-based company.

Reuters, citing two people familiar with the matter, reported Tuesday that The We Company is considering slashing the valuation of its planned stock market launch to below US$20 billion.

We Company may now wait until Monday of next week to begin its roadshow to pitch the initial public offering to investors, one source also told Reuters.

The valuation for the startup could be as low as US$15 billion to US$18 billion, one of the sources with direct knowledge of the matter said, roughly a third of the US$47 billion We Company was valued at when Softbank made a follow-on investment in the company.