SoftBank values WeWork at $2.9 billion, down from $47 billion a year ago

softbank wework Masayoshi Son

  • SoftBank founder and CEO Masayoshi Son said his investment in WeWork was “foolish.”
  • The comment comes as SoftBank gave WeWork a valuation of $2.9 billion as of March 31 based on a discounted cash flow method, down from $7.3 billion as of Dec. 31.
  • WeWork’s private valuation was as high as $47 billion before its botched IPO last year.

SoftBank Founder and CEO Masayoshi Son said Monday he was “foolish” for his firm’s multibillion investment in WeWork.

His comment in an earnings presentation came as SoftBank gave WeWork a valuation of $2.9 billion as of March 31 based on a discounted cash flow method, down from $7.3 billion as of Dec. 31, following its failed IPO. SoftBank has reportedly invested $18.5 billion in the company, according to a comments leaked in October from WeWork’s chairman. WeWork’s private valuation was as high as $47 billion before its botched IPO last year.

WeWork Chairman Marcelo Claure said on Twitter that he and Son are still “huge believers” in what he called the “new” WeWork and its management team.

″[W]e will continue to support the company,” wrote Claure, who is also CEO of SoftBank Group International. “We have no doubt that @WeWork will emerge from #COVID19 stronger than ever and are committed to profitability by 2021.

SoftBank had long been heralded for its savvy and splashy investments. The firm built its name on a massively successful bet on Chinese tech giant Alibaba. But SoftBank’s reputation began taking hits last year when two of its Vision Fund portfolio companies, Uber and WeWork, revealed massive losses in their filings to go public. WeWork’s bid to go public ultimately flopped when the company pulled its IPO filings following persistent criticism about its financial hits and unusual corporate governance structure.

SoftBank’s $2 billion funding round in January 2019 valued WeWork at $47 billion ahead of its bid to go public. Prior to the IPO filing, the coworking-space company was expected to seek a valuation as high as $100 billion. That number slowly crept down as investors and analyst dug into its financials.

“We made a failure on investing in WeWork and I’ve been admitting that several times I was foolish,” Son said, according to a FactSet transcription of his earnings call.

WeWork’s business could suffer even greater losses now that the coronavirus pandemic has made coworking a dangerous activity. With many workers adjusting to their home offices, some companies are reconsidering their needs when it comes to office space altogether.

SoftBank’s Vision Fund posted $18 billion in losses compared with $13 billion in total annual losses for SoftBank Group overall. The $100 billion fund was created to make large bets on companies and infuse them with cash. Of the 88 companies the Vision Fund has invested in, Son predicted Monday about 15 will be successful and 15 could go bankrupt in the midst of the pandemic

In a slide deck, SoftBank illustrated the negative impact of the coronavirus on many of its investments. The presentation said that two major challenges for unicorns, or companies valued over $1 billion, would be a “Rapid decline in demand (sales)” and negative free cash flow.

A series of slides illustrates the “Valley of Coronavirus” in which three animated unicorns trot straight into a massive hole in the ground while running uphill. While two unicorns appear to get stuck in the valley, one flies across the hole to the other side, a metaphor for how SoftBank sees some firms succeeding in the wake of the crisis.

Son also announced Monday that Alibaba founder Jack Ma will also be stepping down from SoftBank’s board effective June 25. He retired as Alibaba chairman in September.

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