SoftBank anticipates $6.6B loss on WeWork investment

Analyst says writedown takes co-working firm closer to true value: “zero”

Softbank CEO Masayoshi Son (Photo by Alessandro Di Ciommo/NurPhoto via Getty Images)
Softbank CEO Masayoshi Son (Photo by Alessandro Di Ciommo/NurPhoto via Getty Images)

SoftBank’s bet on WeWork is causing more pain for the conglomerate.

The group said this week that it is expecting a $6.6 billion loss for the year ending March on a portion of its investment in WeWork held outside SoftBank’s Vision Fund.

The announcement comes two weeks after SoftBank told investors that its annual operating losses would reach a record 1.35 trillion yen ($12.6 billion), and at a time when WeWork is struggling to navigate the pandemic.

“Every writedown takes WeWork’s carrying value closer to reality. Clearly the value is zero,” Kirk Boodry, an analyst at Redex Holdings, told Reuters.

SoftBank has poured billions into WeWork over the years. In a recent interview with Forbes, CEO Masayoshi Son spoke about his tactical regrets, and the co-working company’s botched IPO.

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“We paid too much valuation for WeWork, and we did too much believe in the entrepreneur,” he said.

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Earlier this month, two WeWork directors filed a lawsuit against SoftBank over its termination of an agreement to buy $3 billion in WeWork shares — which would have been a windfall for WeWork co-founder and former CEO Adam Neumann.

SoftBank said it backed out of the tender offer because of “multiple, new and significant pending criminal and civil investigations.”

The men behind the lawsuit — a special committee of WeWork’s board comprised of Benchmark general partner Bruce Dunlevie and former Coach CEO Lewis Frankfort — told the Wall Street Journal that SoftBank’s decision amounted to a breach of contract, “as well as a breach of SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees.” [Reuters] — Sylvia Varnham O’Regan