Oct 01, 2019 (Nikkei) - The extent of SoftBank Group's exposure to the recent woes at WeWork is the talk of the town, as the U.S. office-sharing startup said Monday that it will officially scrap an initial public offering planned for this month.
SoftBank has pledged to pour over $10 billion into WeWork and its affiliates through infusions directly from the company or from the SoftBank Vision Fund, according to filings released by WeWork parent We Co.
SoftBank's direct investment into WeWork looks to be around $7.5 billion, when excluding the $1.5 billion to be executed next year under a warrant agreement, and the $1.6 billion that has gone to WeWork's overseas subsidiaries, such as units in Japan and China.
Judging from SoftBank's multiple investments and its holdings in WeWork, the break-even point for the Japanese tech conglomerate's investment would be a valuation of around $24 billion for the startup.
That means that if the valuation had stayed at $47 billion, as reported in January, SoftBank was set for a major windfall. With the valuation slipping significantly below $20 billion, as it is perceived in the market today, the investment would lose money in a big way.
Chris Lane, senior analyst at New York brokerage Sanford C. Bernstein, calculates that SoftBank and the Vision Fund stand to incur $1.3 billion in paper losses if WeWork's valuation is $20 billion. That breaks down to a loss of $600 million for SoftBank and $700 million for the Vision Fund.
