The Real Deal New York

SoftBank’s investors pump the brakes on a WeWork takeover

Masayoshi Son's investment vehicle was planning a $16B investment in WeWork, as the co-working company is expected to lose $2B this year
December 19, 2018 03:30PM

Masayoshi Son (Credit: Getty Images)

It’s a rare occurrence, but SoftBank’s investors said no.

In this case, it was a majority takeover of WeWork for $16 billion that would have been a step too far. The potential deal, championed by the Japanese investment firm’s head Masayoshi Son, was reportedly squashed by investors concerned about the co-working firm’s astronomical valuation and its potential exposure in the event of a downturn.

The Saudi Arabia and United Arab Emirates sovereign wealth funds, which are majority backers of SoftBank’s $100 billion Vision Fund, reportedly questioned the takeover according to The Wall Street Journal. SoftBank is backing away from the deal as WeWork is forecasted to lose $2 billion this year.

SoftBank has so far committed $8.4 billion to WeWork, including a $3 billion stake announced last month which valued the co-working firm at $45 billion. The Journal reported that Son’s latest planned investment would value the company at $36 billion, and bring the total investment in WeWork by SoftBank and affiliates to $24 billion.

Son will now have to look elsewhere if the deal is to go ahead. His attempts to continue pouring money into WeWork are reminiscent of other bets he has made on small companies that have become industry titans. Those include Uber Technologies and Chinese e-commerce giant, Alibaba.

Under Son’s proposed plan, SoftBank would provide $10 billion to buy out existing outside shareholders, and it would inject $2 billion a year for the next three years, provided WeWork met certain targets. This would also give WeWork CEO Adam Neumann total control of the company. Talks are reportedly ongoing and both WeWork and SoftBank hope that the deal goes ahead early next year as planned.

Traditional real estate firms in the United States have also become wary of the flexible office space giant, and have sought to set up their own companies. Brokerage CBRE launched co-working company Hana and landlord Tishman Speyer has promoted its venture, Zo. [WSJ] — David Jeans