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WeWork bonds move lower amid IPO, valuation doubts

Bonds backing WeWork slipped the morning of Sept. 6 on reports that the shared office space is slashing its IPO valuation and could scrap its listing plans altogether.

The We Co. is parent to WeWork Companies Inc. The coworking giant's 7.875% notes due 2025 dropped 1.125 points in early trading to a weighted average of 102.5, giving up gains made on Wednesday's news that co-founder Adam Neumann will return $5.9 million the company paid him for the "We" trademark earlier this year.

The WeWork lone bond offering hit an all-time high of 104.75 last month when the company filed to go public, fresh from a private financing round that valued it at $47 billion. But institutional investors have balked at the figure, and several reports the morning of Sept. 6 suggest that weak demand could lead WeWork to set its valuation as low as $20 billion, if the IPO proceeds.

Sources said WeWork is currently in talks with its advisers and shareholders as to whether or not to move ahead with the proposed IPO. SoftBank Group Corp. and its associated Vision Fund are the company’s largest independent shareholders, owning about 29% of WeWork, according to Bloomberg. The bank has invested some $10 billion in WeWork, including $5 billion in primary growth capital, and an additional $1 billion in secondary funding on which the initial valuation was based. Softbank is looking to raise capital for a second Vision venture fund, even as the first is weighed down by ill-fated investments in Uber Technologies Inc. and Slack Technologies Inc. Other shareholders include Benchmark Capital and J.P. Morgan.

The company last month secured a debt financing commitment of up to $6 billion from J.P. Morgan, Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, HSBC, UBS and Wells Fargo. The new senior secured credit facility, which would close concurrently with the stock offering, was designed to boost investor confidence by reducing the amount of money the company needed to raise through the listing.