WeWork Is a Headache for SoftBank

Will We go public this year or not? The question matters for technology giant SoftBank as well as WeWork’s embattled parent company. The provider of trendy offices and associated services this week postponed its initial public offering until at least next month. Public-market investors have balked at its valuation—set at $47 billion in a private fundraising this year—and corporate governance. The startup now seems likely to fetch at the very most $20 billion in an IPO.

Such a big drop in We’s valuation would hurt SoftBank, which, together with its $103 billion Vision Fund and Delta Fund, is the company’s biggest outside shareholder.

SoftBank and its co-investors have given nearly $11 billion to We, including the $1 billion they have committed through warrants. SoftBank marked the value of its stake up earlier this year, likely in response to the $47 billion valuation. That suggests an IPO at a much lower price would force the Japanese technology conglomerate to report billions of dollars in paper losses. The valuation write-down may not be huge relative to SoftBank’s total assets, which include a $122 billion stake in Chinese e-commerce giant Alibaba and $23 billion stake in Sprint. But it would affect how investors view its prospects, given that technology investing has become its major focus in the past couple of years. Postponing We’s IPO would forestall the pain, but it could also create another problem for SoftBank. We won’t only miss out on the $3 billion it wanted to raise in the IPO, but also $6 billion in bank loans that are conditional on the listing. That means the cash-burning company will likely need to seek financing elsewhere. SoftBank, its largest and most open-walleted shareholder, is the natural choice. SoftBank may even have to dig into its own pocket, as even its investment partners in the Vision Fund seem to have reservations about sinking more money into We.

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Neither option is palatable for SoftBank. Ultimately, though, the question of We’s IPO exposes a bigger one: Did the cash SoftBank splurged on private technology companies in the past couple of years merely push valuations to levels unacceptable to regular stock investors? There are some good investments in the Japanese company’s portfolio:

Guardant Health


10x Genomics

have both surged since their IPOs. But it is precisely SoftBank’s biggest bets that seem to have the most inflated valuations. Apart from We, it poured $7.7 billion into


That investment is now underwater: The ride-hailing giant’s stock has dropped 25% since its IPO price. SoftBank’s efforts to find investors for another $100 billion technology fund make this question even more urgent. Write to Jacky Wong at JACKY.WONG@wsj.com

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