Japan’s Softbank has confirmed a $2 billion investment in WeWork, a company which offers shared workspaces for companies. The Japanese conglomerate has scaled down its investment plans significantly from $16 billion as reported by media in mid-December 2018, the scaling down of investment comes in the wake of WeWork’s burgeoning losses and shrinking stock prices of Softbank.
Softbank which is a major global investor in technology witnessed a sharp sell-off in the equity market as recent US-China trade war spilled into technological sphere. Technology giant Apple was also no exception as it faced informal customer boycott owing to the ongoing US-China tensions.
Softbank’s proposed investment of $2 billion includes $1 billion of repurchasing of shares from existing investors and employees and primary investment of $1 billion. The new investment will raise valuation of the shared workspace company from $42 billion as estimated in November to $47 billion.
There were talks in December which reported that the investment firm is looking for a controlling stake in the WeWork but as market turmoil caused the Japanese telecom company to lose 14% in shares on its debut public offering, the firm wound up its gigantic investment plans for WeWork.
Softbank was the first to invest $300 million into the workspace provider startup. WeWork although expanded its reach to New York and London but its own losses have skyrocketed in recent years. $723 million in net losses in the first half of 2018 were shocking after $198 million a year earlier.
Softbank has a reputation of banking on technology startups, notable investments of the giant include cab service provider Uber and dog walking startup Wag. But the recent upheaval in technology profits has necessitated a cautious approach for investment.
Since its initial launch in 2010, WeWork expanded its reach to new markets and has presence in 335 locations worldwide. The new financing agreement will fuel the company’s growth plans which has recently acquired 6 companies and pushed into childhood education with its subsidiary WeGrow. The company had plans to increase its space by adding 1, 00,000 office desks in the last quarter of 2018. WeWork has already gathered bullish clout in the real estate and threatened the property brokerage business. The company is planning to start its own investment wing which will focus on acquiring new sites. It has angered brokers as it circumvents them to finalize lease agreements. Although WeWork is the only big player in the field for now but rival ventures including Hana launched by Brokerage CBRE group and Studio will heat up competition in future.