WeWork is locked in negotiations this week with its largest shareholder, Softban...
), over a new $1 billion investment to enable the shared office space company to go through a major restructuring, according to sources familiar with discussions.
SoftBank founder and CEO Masayoshi Son publicly backed WeWork in an interview with Nikkei Business magazine this week, saying in 10 years the company would be “making substantial profits.”However, SoftBank and its Vision Fund, which controls about 29 percent of WeWork after investing or committing to invest $10.65 billion, are facing unusual crosscurrents as they seek a new deal.
But securities analysts say that if it invests in WeWork at a valuation below about $24 billion-$26 billion, which is the estimated basis for its entire stake, then SoftBank and its Vision Fund could suffer on-paper losses. Those would be large if the valuation were closer to $10 billion. WeWork lost $1.9 billion in 2018 and burned through $2.36 billion in cash in the first half of this year, and it could run out of money in the second quarter of 2020 at its current burn rate, according to an analysis last week by securities house Sanford C. Bernstein & Co.WeWork hopes to complete the talks with SoftBank and JP Morgan as early as next week, the sources said, cautioning the plans are subject to change and timetable may still shift.
In recent weeks, global credit rating agencies Standard & Poor’s and Fitch Ratings have also downgraded WeWork’s credit ratings deeper into junk territory, while the company’s junk bond is trading at a record low.
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