Softbank Needs A $24 Billion WeWork Valuation To Break Even On Its Investment

Real Estate

Topline: As WeWork’s biggest shareholder, SoftBank has been under scrutiny for its backing of the troubled office-sharing startup, but a recent report suggests that for it profit off its investment, WeWork would need a much bigger valuation.

  • For Softbank to break even on its investment, WeWork would need to command a $24 billion valuation, according to calculations by Chris Lane, a senior research analyst at Sanford C. Bernstein (first noticed by the Nikkei Asian Review).
  • SoftBank has directly invested around $7.5 billion in WeWork. That number excludes a planned $1.5 billion investment next year and the $1.6 billion already invested in WeWork’s overseas subsidiaries.
  • Based on SoftBank’s investments and holdings in WeWork—some of which are through its Vision Fund, the Japanese tech conglomerate has acquired 114 million shares, at a weighted average cost per share of $65.8, Lane’s report finds.
  • The Sanford Bernstein analyst calculates that SoftBank would have made a $7 billion paper profit if WeWork had maintained the $47 billion valuation reported in January.
  • If WeWork were to go public at $20 billion, SoftBank stands to lose $1.3 billion, Lane maintains. At a $15 billion valuation, SoftBank’s unrealized loss grows to $3.8 billion.
  • Based on these calculations, WeWork would need to eventually IPO with at least a $25 billion valuation for SoftBank to make a profit from its original investment.

Key background: SoftBank has poured nearly $11 billion into the real estate and workspace startup. When SoftBank invested in January, it did so at a $47 billion valuation. But since then, mounting investor concern over WeWork’s business model and irregular corporate governance drove WeWork’s potential valuation down drastically. The company considered going public with a valuation as low as $10 billion—before it scrapped plans for an IPO in 2019 altogether. 

Tangent: Since taking the helm from embattled founder Adam Neumann, co-chiefs Artie Minson and Sebastian Gunningham have moved quickly to cut costs and raise cash in an effort to save WeWork’s business. While cancelling WeWork’s plans for an IPO this year, the two said in a statement that they “look forward to revisiting the public equity markets in the future.”

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