SoftBank Requests WeWork to Put IPO on Hold
Recent reports have revealed the request made by SoftBank Group to the US office sharing start up, WeWork. Reports claim that Soft Bank has urged WeWork to devise a planned IPO because of the issues about the valuation that can be achieved in listing.
The We Company, WeWork’s parent company, has been trying hard in recent times to raise its flotation between $3bn and $4bn. Despite all efforts, the firm has faced severe criticism from the Wall Street investors and analysts. Regular questions have been raised over its governance, its use of a complex corporate structure and its payments made to chief executive and co-founder Adam Neumann.
SoftBank group, the largest shareholder of WeWork, is preparing itself to deal with a potential loss, a reminder of an investing strategy that inflated startup valuations across Silicon Valley. The firm and its Vision Fund that mainly invests in disruptive artificial intelligence technology, has recently invested a prodigious amount of $10 billion in WeWork.
SoftBank claims that if WeWork drops its private market valuation even further, there is a possibility that the negative impact created by it, might affect the company’s ability to raise its second vision fund. Hence, SoftBank decided to force the company to drop its IPO plans.
A WeWork spokesperson said, “The company is in a quiet period and will politely decline to comment.”
Citing unnamed sources, Sunday edition of The Wall Street Journal reported that WeWork could cut the valuation for its IPO to under $20 billion and might postpone the offering even further. In the last funding round reported, the company was valued at $47 billion.
In order to improve the interest of investors in the offering, the firm is planning to launch an investor roadshow this week. As per sources, WeWork is soon going to consider the viewpoints of investors and discuss possible amendments that can ensure a successful IPO.
WeWork has lost nearly $4bn since 2016, even though the firm has witnessed a significant hike in its revenues every year.
In the IPO filing released, WeWork said that if there is a requirement to gain profit, it can slow its expansion. But as the business model has not been tested by any economic downturn, investors are not trusting the firm. Many investors have shown serious concerns about the firm leasing office space for a long period of time – near about 15 years.
In response to investor complaints, Adam Neumann has returned payment worth $5.9m that his firm received from the company for rights to use their trademarked word, “We”. Showing active participation in the women empowerment motif, We Company has disclosed its plans to introduce a woman to its existing all male board of directors.
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