SoftBank agrees to $2 billion WeWork investment
SoftBank has agreed to invest another $2 billion into WeWork, per multiple sources and reports. Expect a large percentage of it to be secondary capital — i.e., buying out existing shareholders.
The state of play: There's lots of buzz about how this deal is much smaller than what was originally contemplated, including one 2018 report whereby SoftBank could acquire a majority stake in the co-working space giant.
The big picture: We told you in October that the control deal was no longer on the table, but that investment negotiations were ongoing.
- Fast Company this morning reports, based on an interview with CEO Adam Neumann, that the two sides neared a much-larger deal that could have bought out all of WeWork's existing shareholders, but that SoftBank bailed after a disappointing IPO for its Japanese mobile unit. In short, SoftBank's corporate balance sheet was smaller and less flexible than had been originally anticipated.
- SoftBank theoretically has enough dry powder in its Vision Fund, but we hear that the Saudi connections made that prospect less appealing to both sides due to perceived regulatory risk (read: CFIUS, particularly in light of the Khashoggi murder).
The bottom line: Don't read this deal as a macro commentary on unicorn troubles. SoftBank is still investing $2 billion into WeWork, in which it already holds a sizable position though both its balance sheet and Vision Fund, and doing so at a high valuation.
- Not even the most profligate investor spends that kind of coin if it believes the market is crumbling. There also is a NYT report that SoftBank may have had trouble getting enough WeWork shareholders to sell into the larger proposal.
Go deeper: WeWork rebrands to The We Company