Mubasher: Saudi Arabia’s sovereign wealth fund and Abu Dhabi state-owned investment arm, which are the biggest backers of SoftBank Group, have balked at the Tokyo-based technology conglomerate’s planned $16 billion acquisition of co-working startup WeWork Cos.
The Public Investment Fund (PIF) and Abu Dhabi’s Mubadala Investment Company told SoftBank executives they have worries about the latter’s talks to acquire a controlling stake of money-losing WeWork, people familiar with the matter told the Wall Street Journal (WSJ).
In 2017, SoftBank’s Vision Fund, the world's largest technology investment vehicle, purchased nearly a fifth of WeWork with an investment of $4.4 billion at a valuation of $20 billion. Since then the Japanese technology giant has become a major investor in New York-based WeWork, whose industrial-chic workspaces and short-term leases have placed it as one of the world’s hottest startups.
“SoftBank subsequently committed another $4 billion, including a $3 billion commitment last month at a $45 billion valuation. The new investment would value WeWork at around $36 billion,” the people told the WSJ. The recent investment would bring SoftBank and its subsidiaries’ total investment in WeWork to as much as $24 billion.
It is worth noting that the PIF and Mubadala, the state-owned investments arms of the Middle East’s two biggest economies, contributed the bulk of the nearly $100 billion raised by the SoftBank Vision Fund.
Their size grants them “an effective veto over certain investments and a loud voice invalidating [SoftBank chief executive Masayoshi Son’s] moves,” the WSJ added.
Some of the people said that the Saudi PIF and Abu Dhabi’s Mubadala have doubts about the wisdom of doubling investment in WeWork, and have questioned its rich valuation.
WeWork is on pace to lose about $2 billion this year, and the two GCC state-owned funds have expressed concerns that WeWork’s model could leave it exposed if the economy turns, Some of the people told the US newspapers.
The under consideration transaction would comprise $10 billion from SoftBank to purchase most existing outside shareholders, along with a further $6 billion in new capital for WeWork in the coming three years, people with knowledge of the matter said.
SoftBank’s chief executive still hopes the GCC sovereign funds will give to the Vision Fund a green light to pay for some of the deal, one of the people said.
SoftBank also is mulling over other means to fund its acquisition of WeWork, including using its own cash, raising debt and bringing in outside investors, the person noted.
The Japanese giant may use the proceeds from the initial public offering (IPO) of its Japanese telecom business, he added.
