Softbank Needs A $24 Billion WeWork Valuation to Break Even on Its Investment

Real Estate |

SoftBank is WeWork’s biggest shareholder, so naturally, it has been under heavy investigation for its support of the controversial office-sharing start-up. However, a recent report found that WeWork would need a much larger valuation for SoftBank to profit off of its investment.

In fact, WeWork would need to be at a valuation of $24 billion for SoftBank to break even, according to Chris Lane’s calculations, a senior research analyst at Sanford C. Bernstein.

SoftBank has invested somewhere in the ballpark of $7.5 billion in WeWork, not including the $1.5 billion they plan to invest next year and the $1.6 billion they’ve already invested in WeWork’s overseas subsidiaries. 

Lane’s report found that based on SoftBank’s investments and holdings in WeWork, some of which are through its Vision Fund, it has amassed 114 million shares at $65.8 on average per share.

If WeWork had held its $47 billion valuation reported in January, the Sanford Bernstein analyst calculates that SoftBank would have made a $7 billion paper profit. If WeWork were to go public at $20 billion, that would result in $1.3 billion in unrealized losses for SoftBank. 

Losses on Paper are Amounting

Since its current valuation is $15 billion, SoftBank could lose $3.8 billion on paper. As a result, for SoftBank to make any profit from its original investment, WeWork would need to IPO with at least a $25 billion valuation.

Softbank invested close to $11 billion into WeWork in January when the real estate and workspace start-up was at $47 billion valuation. Ever since then, however, concern has grown over WeWork’s business model and unusual corporate governance, and, as a result, their valuation dropped drastically. 

Before it scrapped plans for an IPO in 2019, the company considered going public with a valuation as low as $10 billion.

Co-chiefs Artie Minson and Sebastian Gunningham have done all they can to save WeWork’s business since they took over for the founder, Adam Neumann. The two said in a statement that they “look forward to revisiting the public equity markets in the future” while they cancelled the IPO planned for this year.