WeWork Considers Slashing Its IPO Valuation to Levels Below $20 Billion

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

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

WeWork's management is reportedly preparing to approach investors who might be interested in acquiring the company's shares, even though some investors want the real estate firm to postpone its IPO.

The WSJ noted that the We company was planning to raise $3 billion to $4 billion in the IPO and up to $6 billion in debt that is contingent on the IPO raising at least $3 billion.

The troubles for We Company and its primary business WeWork are mounting as reported that the company's essential backer, Softbank, is pushing for the company to put its troubled public offering on hold. SoftBank and its Saudi-backed Vision Fund have invested more than $10 billion in WeWork, and CNBC notes that it could face a multi-billion-dollar write-down if WeWork makes it debut with a valuation between $15 and $20 billion.

A sharp cut to WeWork's valuation would be a blow to SoftBank as at a time when it is seeking funds from investors for a second Vision Fund, for which it says $108 billion in pledges have been secured.

SoftBank made a follow-on investment in WeWork, one of its biggest tech bets, at a $47 billion valuation earlier this year - a number widely treated with scepticism by analysts.

A roadshow to market the shares to new investors that was supposed to begin today was in doubt, and there were chances that it would not happen this week, sources said. 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.

However, in recent days Son and Fisher have now conceded privately that a delay might be in SoftBank's best interests, the source added.

Other sources stressed the situation was still in flux. WeWork's underwriters are also planning to meet with investors to discuss possible changes to ensure a successful IPO, The Journal said. But questions circulating around the firm's business prospects quelled the hype on listing the hipster office sharing company.

A low valuation would hit SoftBank Group especially hard.

The tech conglomerate has burned through much of the $100 billion raised by its first Vision Fund in just two years, recording big paper gains on internal revaluations of its tech investments as well as the sale of marquee investments including India's Amazon Inc rival Flipkart.

At the end of June the fund recorded the value of $71 billion in investments in 83 startups as having grown by $20 billion.