Japan's SoftBank Group Corp. is in detailed talks to invest US$2 billion in WeWork Cos. Inc. in 2019, down from the previously reported US$16 billion planned commitment, and will not take a majority stake in the coworking startup, London's Financial Times reported, citing unnamed sources.
The potential investment in WeWork could be announced as soon as this week and will not include the participation of the SoftBank Vision Fund, which is already a key investor in WeWork, the publication added, citing the sources. The parties have not yet reached an agreement on the WeWork funding, which comes on top of US$10 billion SoftBank already invested, and the deal could still fall apart.
In December 2018, SoftBank Vision Fund investors Public Investment Fund of Saudi Arabia and Abu Dhabi's Mubadala Investment Co. reportedly voiced concerns over SoftBank's planned US$16 billion investment in WeWork.
Among its investments in WeWork, SoftBank invested US$1 billion in August 2018 in the form of a convertible note, followed by a commitment in November 2018 to inject US$3 billion in an equity warrant. As part of the agreement, WeWork is set to receive US$1.5 billion Jan. 15 and another US$1.5 billion April 15 from SoftBank.
According to one of the sources, complications to negotiations on valuation with SoftBank could lead WeWork executives to accelerate the company's plan for an IPO.
WeWork's losses in the first nine months of 2018 almost quadrupled year over year to US$1.2 billion, while its sales rose to US$1.5 billion, the FT reported, citing an investor presentation.
SoftBank's decision to scale back its planned investment in WeWork would not impact the coworking giant's overall strategy, the report added, citing people close to the deal.
WeWork and SoftBank did not comment on the matter.