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How SoftBank's bets on WeWork totaled US$16 billion

NEW YORK: SoftBank Group Corp, the Japanese conglomerate led by Masayoshi Son, invested about US$16 billion in WeWork in the years that led up to the flexible-workspace company’s bankruptcy, according to Reuters calculations.

The spectacular implosion of WeWork, which has inspired books, podcasts and a TV show, was among the most expensive SoftBank bets that soured after the firm raised Vision Fund 1 (VF1) – a US$100 billion investment fund it raised in 2017 with the backing of outside investors – and blotted Son’s reputation as a savvy investor. In 2019, SoftBank launched Vision Fund 2 with its own capital.

Since SoftBank first wrote a US$4.4 billion check to WeWork in early 2017, the Japanese conglomerate invested nearly US$12 billion more of equity and debt in WeWork through its various entities, including its Vision Funds, according to regulatory filings, press releases and data analysed by Reuters.

SoftBank’s bet on WeWork started to unwind at the time of its highly-anticipated initial public offering (IPO) in 2019 when the company was being courted by Wall Street’s top investment banks, many of whom had pitched SoftBank and WeWork astronomical valuations at the time.

By October that year, WeWork’s IPO had been abandoned and the company found itself on the brink of going underwater, forcing SoftBank to put together a rescue financing package of US$9.5 billion, including a US$5 billion debt package, to bail out the company. The deal valued WeWork at US$8 billion at the time.

Son later publicly admitted that he overestimated WeWork and its co-founder Adam Neumann, whose erratic management style, combined with WeWork’s lack of a clear path to profitability, alienated potential IPO investors. Neumann quit as CEO in 2019, bowing to pressure from some investors.

WeWork subsequently went public through a deal with a special purpose acquisition company (SPAC) in 2021 that valued the company at US$9 billion. However, even after it hired new management in 2020, SoftBank struggled to turn WeWork’s fortunes around, despite the company’s efforts to drastically cut costs, shutter money-losing locations, and sign new clients.

SoftBank had a credit support deal with WeWork worth $1.1 billion as of the end of Jun 2023.

Related:

Explainer-Why WeWork failed, and what is next

SoftBank makes another bet on WeWork, hoping landlords will too

WeWork begins to renegotiate leases globally, plans to exit 'unfit' locations
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