SoftBank pushes WeWork to postpone its contentious IPO

SoftBank urges We Work to shelve IPO

The pressure follows signs that outside investors do not value the much-hyped firm as highly as SoftBank did when it invested past year.

A low valuation would hit SoftBank Group especially hard.

WeWork's management is reportedly preparing to approach investors who might be interested in acquiring the company's shares, even though some investors want the real estate firm to postpone its IPO.

Softbank Group, a top shareholder in the holding company of US office-sharing startup WeWork, is urging it to shelve a planned IPO on concerns over the valuation that can be achieved in a listing, the Financial Times reported on Monday.

On Sunday, The Wall Street Journal reported that WeWork's parent company, the We Company, is considering an IPO valuation below $20 billion.

SoftBank which has invested or committed to invest $10.65 billion in WeWork - which was rebranded We Company earlier this year - since 2017.

SoftBank chief Masayoshi Son and longtime lieutenant and group Vice Chairman Ron Fisher were in favor of the WeWork IPO until last week, even as others inside the group were pushing for a delay, one of the sources said.

While SoftBank and its Vision Fund emphasize their long-term investing credentials, founder and CEO Son has set out an ambitious IPO pipeline for tech investments spanning ride-hailing, fintech and health startups. WeWork's S-1 revealed that the company is not profitable- in 2018 The We Company generated $1.8 billion in revenue but suffered $1.9 billion in losses.

An IPO at a $15 billion valuation would result in a $4 billion writedown for the Japanese conglomerate and a $5 billion loss for the Vision Fund, while a debut at $25 billion isn't likely to result in losses, Chris Lane, an analyst at Sanford C. Bernstein & Co., wrote in a report.

The company aims to raise just over US$3 billion from its IPO, considered one of the most important of the year, and to obtain a line of credit of US$6 billion from major banks, sources said.

Vision Fund defends its valuation techniques, which include cash-flow analysis, recent transactions and comparison with peers to underpin its numbers.

At the end of June the fund recorded the value of $71 billion in investments in 83 startups as having grown by $20 billion.

If a tech company shelves an IPO due to a lower valuation than expected, investors are generally expected to take that fall into account when appraising their stakes.

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