SoftBank plans reduced US$2 billion investment in co-working start-up WeWork

  • SoftBank has already invested more than US$8 billion in WeWork
PUBLISHED : Tuesday, 08 January, 2019, 5:18pm
UPDATED : Tuesday, 08 January, 2019, 5:18pm

SoftBank Group has decided against taking a controlling stake in real estate company WeWork and is instead planning to make a smaller US$2 billion investment, according to people familiar with the matter.

SoftBank, which has already invested more than US$8 billion in WeWork, had discussed taking a controlling position in the co-working start-up, potentially spending US$16 billion to buy a larger position in the company, said the people, who requested anonymity because the talks are private.

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Recent declines in technology stocks – particularly SoftBank’s shares, which are down about 20 per cent in the last month – played a role in the decision to reduce the deal’s scope, one of the people said.

WeWork’s 7.875 per cent bonds, which are due in 2025, dropped 3 cents on the dollar to 86 cents on Monday afternoon in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That is the lowest price since the debt was issued last April.

SoftBank and WeWork declined to comment on the talks. The Financial Times earlier reported SoftBank’s plans to downsize its WeWork investment.

Stock markets have taken a beating in recent months over fears of a global recession and a trade war between the United States and China, two of the world’s largest economies. The S&P 500 index is down 13 per cent from a September high. Meanwhile, some venture capitalists are warning that private technology companies are overvalued, and they place a big part of the blame on SoftBank, which has been spending aggressively in Silicon Valley.

Masayoshi Son’s SoftBank is said to consider taking a majority stake in co-working start-up WeWork

SoftBank controls two large pockets of money, the US$93 billion Vision Fund and its own corporate coffers. Originally the SoftBank Vision Fund, in part backed by the Saudi Arabian government, was considering buying the controlling stake in WeWork. Now, SoftBank the company is planning to make the investment directly.