SoftBank Deepens Its Commitment to WeWork’s Future
Already WeWork’s largest investor, Japan-based SoftBank Group has committed an additional $3 billion via a warrant that the two companies have signed, Bloomberg News reported. The deal values WeWork at $42 billion or more.
This latest investment comes directly from SoftBank, rather than from its $92-billion Vision Fund. Previously, WeWork raised $1 billion from SoftBank in August in the form of a convertible note, which would convert to equity at varying share prices depending on the outcome of the coworking company’s next funding round.
WeWork’s most recent funding round in 2017, which saw SoftBank invest about $4.4 billion through the Vision Fund, valued it at $20 billion. However, in June a SoftBank executive said WeWork was raising money at a $35-billion valuation, Bloomberg reported.
A valuation of $42 billion to $45 billion would make WeWork the second most valuable U.S. startup behind Uber Technologies and ahead of Airbnb Inc., according to Dow Jones VentureSource.
Under terms of the warrant signed by SoftBank and WeWork—which doesn’t affect the convertible note issued in August—SoftBank has agreed to pay $3 billion to WeWork for the opportunity to buy shares before September 2019.
The price per share would be $110 or higher, depending on whether the privately held WeWork goes public, is acquired, or conducts a $1-billion fundraising round before next September.
The warrant deal comes shortly after the Wall Street Journal reported that discussions are underway for SoftBank to pay between $15 billion and $20 billion for majority ownership of WeWork. Its present stake in the company is nearly 20%, and it’s not clear how the warrant deal ties in with the possible majority ownership, the WSJ reported.
Although WeWork is privately held, it has provided regular informal updates on some financial metrics since April, when it sold $702 million in bonds rated as junk by credit agencies, Bloomberg reported.
The company lost $1.22 billion on $1.25 billion in sales in the first three quarters, including $482 million in sales in Q3. However, if WeWork kept up its September sales pace for the next 12 months, it said, revenue would exceed $2 billion for the year.
Lately, WeWork has stepped up sales of office space to large enterprises, which tend to sign longer contracts. Deals with larger users comprised 29% of WeWork’s memberships at the end of Q3, compared with 25% in the previous quarter.
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