SoftBank to slash planned WeWork investment

Japan’s SoftBank has radically scaled back plans for fresh investment in WeWork, the loss-making, shared-office provider, following the recent tech stock rout and concerns among investors in its $100 billion Vision Fund.

SoftBank is in detailed negotiations to inject $2bn into WeWork this year, according to two people briefed on the deal, a much lower amount than the $16 billion that had been discussed towards the end of last year.

And the deal will now not include the participation of Softbank’s Vision Fund, which had been a major backer of Softbank’s existing investment of more than $8 billion in WeWork.

The funding could be announced as soon as this week, according to one of the people, who added that the deal had not yet been agreed and could still fall apart.

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The scaling-back of the planned $16bn investment, which would have been the largest ever in a tech start-up, underlines the rapid shift in investor enthusiasm for technology shares that is now spilling into even the best-known privately held groups.

SoftBank has been instrumental in propping up private market valuations, investing billions of dollars in start-ups from ride-hailing group Uber to dog-walking app Wag.

WeWork has been one of the company’s largest bets, garnering billions from SoftBank as the group sought to dominate the fast-growing market for shared office space in cities such as New York and London even as its own losses have ballooned.

The negotiations over fresh funding have taken place against a backdrop of a sharp sell-off in equity markets that saw some of the world’s largest technology companies particularly hard hit in recent months.

Shares in SoftBank itself have fallen by 33 per cent in the past three months. The company also suffered an embarrassing start to trading for its newly-listed Japanese mobile phone business in late December after raising $23 billion from investors.

SoftBank will not gain a majority stake in the shared-office provider, which has become known for specialist coffees and fruit-infused water in its canteens and Instagram-ready art on its walls.

WeWork and SoftBank declined to comment.

If a deal is finalised, SoftBank will still have pumped more than $10bn into the company, marking one of the biggest bets on a start-up by SoftBank founder Masayoshi Son.

WeWork’s overall strategy will not be affected by SoftBank’s decision to pull its planned buyout of other investors in the group, people close to the deal said.

Copyright The Financial Times Limited 2019