China’s Legend Holdings embraces ‘shared economy’ with investment in WeWork

PUBLISHED : Sunday, 10 July, 2016, 5:17pm
UPDATED : Sunday, 10 July, 2016, 11:28pm

Legend Holdings has made its first big bet on the “shared-economy” as lead investor in the latest fundraising round by shared office space start-up WeWork Co, vowing to help the New York-based firm expand in China.

The investment is seen as an attempt by the conglomerate, famous for its Lenovo laptop and smartphone products, to tap into the shared-economy, a market it sees as the next major gateway to explosive growth opportunities.

“The major attraction of WeWork to us is that it caters to a mega-trend in the world and China, especially for the young generation. The world’s centre is not ‘I’, but ‘we’,” Ji Chaofeng, managing director of Legend Holdings’ asset management department, said in a seminar held Friday.

WeWork has raised US$750 million in new funds from a group of mostly mainland Chinese investors. Leading the latest round of Series F fundraising is Legend Holdings and its subsidiary Hony Capital, with the rest of the Chinese investors contributing a “substantial” share, an executive with Hony Capital told the Post.

An earlier Forbes report said WeWork raised funds of between US$430 to US$750 million.

Legend and Hony Capital confirmed the deal but did not disclose how much they had invested. The details will be announced at a later stage.

WeWork announced the fundraising in March but it was not until the weekend that the New York-based start-up confirmed that the deal had materialised. At that time, the company had closed on US$430 million worth of funds, with commitments for the remaining amount.

WeWork said it has authorised the sale of up to US$780 million in new equity, and the current fundraising round remains open, even after it secured the US$750 million from a group of predominantly mainland Chinese investors.

The capital will be for WeWork’s expansion in Asia, which includes three newly opened work spaces in downtown Shanghai. WeWork was launched in 2010 and China is the 12th country it has entered.

Responding to concerns that the valuation of WeWork is excessively high – currently at $16 billion – Ji said he is confident that WeWork has a proven viable business model in existing markets, unlike other start-ups that may fit the mega-trend but haven’t been making money.

“We are not investing in a ‘concept’ but in a proven business model. WeWork has a annual return on cash of 3 per cent, and its occupancy rate is near 100 per cent in the United States. It has a good profitability and cash flow,” Ji said.

He said what’s more exciting is that Legend Holdings can combined its deep resources in China to help WeWork leapfrog competitors in the market. WeWork can also benefit from other businesses under Legend, such as real estate, in what the company calls “internal synergy”.

Legend also has confidence in the company’s management which is a team that has “global vision”, according to Ji.

Starting from its base in New York, the red-hot start-up has already expanded to 25 cities around the world and has a paid membership base of 55,000.

Ji said after the fundraising is finalised, Legend will have its own representatives on the WeWork board. Legend also plans to help the start-up open spaces in Beijing and expand “WeLive”, a living space-sharing programme under WeWork.