WeWork has hit the headlines yet again – this time around, the company’s new investor, SoftBank is injecting a further $8 billion investment into the embattled workspace rental firm. Despite having acquired WeWork at $8 billion (a valuation that analysts are still struggling to wrap their heads around) and issuing a $1.7 billion sendoff package for its co-founder and former CEO Adam Neumman, the Japanese Investment bank is once more pumping more money to the tech startup.
Softbank was still an existing investor even before WeWork’s failed IPO. Sources indicate that a huge chunk of the conglomerate bank’s initial investment of about $10 billion went up in smoke after the firm’s failed listing, and as a standalone deal, experts believe it to be a bad one.
Things have been going south for the once-admired tech firm; from its slashed valuation to governance issues to layoffs, just to name a few. However, SoftBank seems to have a soft spot for WeWork if its endless rounds of funding are anything to go by.
Many have criticized the deal between SoftBank and WeWork, with some likening it to throwing good money after bad. Recent happenings reveal how investor confidence in the company is botched, and any attempts to go public in the near future could be disastrous. So unless SoftBank plans to make WeWork its long-term investment, there are little prospects for any serious returns any time soon, analysts say.
According to sources, SoftBank’s commitment to reviving WeWork may be driven by its plan to raise $108 billion for its second Vision Fund. In its first Vision Fund, SoftBank managed to sell “trust” to investors who pumped about $97 billion in the bank’s early stage, high growth startups. However, the confidence in its second round of vision-funding is being shaken by WeWork’s spectacular failure after pumping more than $20 billion of the first Vision Fund money in it.
SoftBank pegged its hope on the fact that just like Uber, WeWork operates in a “winner takes it all” kind of industry, the same case with Amazon and the eCommerce space. SoftBank believed that WeWork would revolutionize the online space renting industry and take it over.
But things seem not to be going as planned and now SoftBank is hoping to prove the masses wrong by not cutting its losses. Moving forward, the market might remain cautious about investments fronted by SoftBank if their focus doesn’t shift.