SoftBank is urging WeWork to shelve its highly-anticipated initial public offering (IPO), the Financial Times has reported. The Japanese group is said to have pointed to valuation concerns over the office space manager which has yet to turn a profit.
Softbank urges WeWork to shelve IPO
Sources with knowledge of the matter told the FT that Softbank, the biggest outside shareholder in WeWork, had urged the loss-making company to shelve its IPO after it received a cool reception from investors. While the Japanese group and its Saudi-backed Vision Fund have pumped more than $10bn into the office space provider, SofftBank’s enthusiasm for a listing has reportedly waned as bankers have slashed the valuation they believe the We Company can attain when it lists.
The update comes after it emerged last week that WeWork was looking at a float valuation of about $20 billion, less than half the $47 billion figure the company reached in its last round of funding from SoftBank.
The FT further noted that advisors for the We Company were said to still be testing investor appetite at a valuation of between $15 billion and $20 billion.
Analysts weigh in on news
Reuters quoted Sanford C. Bernstein analyst Chris Lane as commenting that if the WeWork IPO was halted, SoftBank could come up with an alternative funding plan for the startup, which, the analyst estimates, needs $9 billion in funding to become cash-flow positive.
SoftBank “have got an important voice, but more importantly they have money […] (The We Company) will have to listen to them,” said Lane, who values the office space-sharing firm at $23 billion.
The newswire further notes that 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.