WeWork planning to drop valuation to below US$20 bln

WeWork reportedly might slash its valuation below $20 billion, or even postpone its IPO

The company is continuing to talk to its biggest investor, SoftBank Group Corp., about whether the Japanese technology giant would put in additional capital through the IPO by buying a significant portion of the shares on offer or invest a chunk of money that would allow We to delay its IPO until 2020.

WeWork could slash the valuation it seeks as a public company to below $20 billion, or even postpone its initial public offering, The Wall Street Journal reported on Sunday, citing unnamed people familiar with the matter.

The sharply lower valuation reflects concerns around the sustainability of We Company's business model, which relies on a mix of long-term liabilities and short-term revenue, and how such a model would weather an economic downturn, according to investors and analysts.

Some investors are also anxious about skepticism surrounding the company's business model and want its planned initial public offering (IPO) to be pushed to next year, sources said on condition of anonymity.

SoftBank which has invested or committed to invest $10.65 billion in WeWork - which was rebranded We Company earlier this year - since 2017.

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Representatives for SoftBank and We Co., the parent of WeWork, declined to comment.

While Softbank and its $100 billion Vision Fund emphasise their long term investing credentials, founder and CEO Masayoshi Son has set out an ambitious IPO pipeline for its tech investments, spanning ride-hailing, fintech and health startups. As per sources, WeWork is soon going to consider the viewpoints of investors and discuss possible amendments that can ensure a successful IPO. It chalked up US$690 million in losses in just the first six months of 2019, bringing its total losses to nearly US$3 billion in the past three years, filing from WeWork's preliminary prospectus showed. In the last funding round reported, the company was valued at $47 billion.

The company aims to raise just over US$3 billion from its IPO, considered one of the most important of the year, and to obtain a line of credit of US$6 billion from major banks, sources said.

SoftBank says its valuation techniques include cash-flow analysis, recent transactions and comparison with peers to underpin its numbers, but Son has won a reputation for intuitive bets and for doubling down on companies which have yet to generate hard results.

At the end of June the fund recorded the value of $71 billion in investments in 83 startups as having grown by $20 billion. Since then, the share prices of Uber and Slack have both fallen by around a third.

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