Vision Fund's Wework Investment: A Bold Move?

In August 2017, WeWork confirmed a $4.4 billion investment from SoftBank and its Vision Fund, with $3 billion going directly to WeWork and $1.4 billion invested into three subsidiaries: WeWork China, WeWork Japan, and WeWork Pacific. This investment gave SoftBank a major presence on WeWork's board of directors, with the addition of SoftBank vice chairman Ronald D. Fisher and external director Mark Schwartz, a former Goldman Sachs executive. However, the relationship between WeWork and SoftBank's Vision Fund eventually soured, with WeWork's bankruptcy filing in 2023 revealing significant flaws in the investment style of Japanese billionaire Masayoshi Son, the CEO of SoftBank. The Vision Fund's investment in WeWork resulted in substantial losses for SoftBank, with the company reporting a record loss of $1.36 trillion yen in the fiscal year ending March 2020.

SoftBank's Vision Fund lost $14 billion on WeWork

SoftBank's Vision Fund has lost billions of dollars on WeWork, a company that provides co-working office spaces. In August 2017, SoftBank, led by Masayoshi Son, finalised a $4.4 billion investment in WeWork. Son was reportedly "charmed" by WeWork founder Adam Neumann and overrode his lieutenants' objections to hand Neumann billions of dollars. This investment lifted WeWork's valuation to an astronomical $47 billion in early 2019.

However, just months later, investors were concerned about the deep losses and conflicts of interest revealed in WeWork's IPO filings. WeWork's valuation dropped to around $3 billion from $47 billion in just one year, and the company had to pull its planned IPO in 2019. As a result, SoftBank stepped in with a $9.5 billion rescue package and took over 80% of WeWork's shares. Despite this, WeWork continued to struggle, eventually filing for bankruptcy.

The exact amount that SoftBank's Vision Fund lost on WeWork is unclear and may depend on how much of their stake they sell. Some sources state that SoftBank's Vision Fund lost $1.7 billion on WeWork, while others put the number at $4.6 billion. However, one source mentions that SoftBank as a whole lost $11.5 billion in equity losses on WeWork, with another $2.2 billion in debt still on the line.

The failure of WeWork has damaged Masayoshi Son's professional reputation and has raised questions about his investment style. Son's tendency to bid up valuations and give founders more money than they asked for has drawn criticism from rivals in Silicon Valley. The WeWork debacle has also highlighted the risks of overestimating a company's future and continuously investing in overvalued startups.

WeWork's valuation reached $47 billion in 2019

WeWork, a provider of coworking spaces, was valued at $47 billion in 2019. This valuation was the result of investments from SoftBank and its Vision Fund, led by Masayoshi Son. In 2017, WeWork received a combined $4.4 billion investment from SoftBank and the Vision Fund, with $3 billion going directly to WeWork and $1.4 billion invested in its subsidiaries in China, Japan, and the Pacific. This initial investment significantly boosted WeWork's valuation, which was previously estimated at around $16.9 billion in 2016.

The $47 billion valuation in 2019 was, however, short-lived and was followed by a rapid decline. WeWork's attempt to go public through an initial public offering (IPO) failed due to criticism of its governance, business model, and ability to turn a profit. The company faced mounting pressure from investors, leading to the resignation of co-founder Adam Neumann as CEO and the postponement of its IPO.

The inflated valuation of WeWork at $47 billion has been attributed to SoftBank's aggressive investments and the easy money provided to Neumann by Masayoshi Son. This valuation was not supported by other investors, and the subsequent failure of the IPO exposed the flaws in the investment style of Masayoshi Son and damaged his reputation as a shrewd investor.

WeWork's valuation of $47 billion in 2019 was an important milestone in its journey, but it also marked the beginning of a downward spiral that eventually led to its bankruptcy filing in 2023. The company's struggle to solve its debt issues and profitability challenges, along with the impact of remote work, contributed to its financial troubles.

WeWork's IPO filing revealed deep losses and conflicts of interest

In 2017, SoftBank and its Vision Fund invested a combined $4.4 billion in WeWork, with $3 billion going directly into WeWork and $1.4 billion invested into three subsidiaries: WeWork China, WeWork Japan, and WeWork Pacific. This investment gave SoftBank a major presence on WeWork's board of directors, with SoftBank vice chairman Ronald D. Fisher and external director Mark Schwartz, a former Goldman Sachs executive, joining the board.

In 2019, WeWork's IPO filing revealed deep losses and conflicts of interest, sparking intense scrutiny of its finances and leadership from investors and the media. The filing showed that WeWork's parent company, The We Company, had more than quadrupled its revenue from 2016 to 2018, increasing from $436 million to $1.82 billion. However, its annual losses also mounted during this period, reaching $1.61 billion in 2018. For the first six months of 2019, the firm posted a loss of $690 million on $1.5 billion in revenue.

The IPO filing also revealed conflicts of interest, as CEO and co-founder Adam Neumann owned several of the buildings leased by WeWork. Additionally, WeWork loaned millions of dollars to Neumann and other executives, raising further concerns about corporate governance. As a result, WeWork faced criticism for its financial management and the behaviour and business dealings of its eccentric CEO.

The fallout from the IPO filing was significant. WeWork's valuation plummeted from $47 billion to as low as $10 billion, and Neumann was removed as CEO, eventually stepping down from his position as chairman of the board. SoftBank, WeWork's biggest investor, took control of the company and provided a $9.5 billion rescue package, which included a $1.7 billion golden parachute for Neumann to step down. WeWork also laid off 2,400 employees and postponed its IPO indefinitely.

WeWork's bankruptcy filing caps a years-long saga

However, just months later, WeWork's IPO filings revealed deep losses and conflicts of interest, causing investors to balk. WeWork's subsequent nosedive has cost SoftBank more than the estimated $11.5 billion in equity losses and another $2.2 billion in debt still on the line. The public decline of WeWork, coupled with the Vision Fund's record loss of $32 billion, tarnished Son's standing as a shrewd investor.

Son's tendency to bid up valuations and his gut instinct-driven decisions, such as encouraging WeWork's founder, Adam Neumann, to think bigger, may have contributed to the downfall. Even after WeWork's botched IPO attempt in 2019, SoftBank stepped in with a $9.5 billion rescue package, with Son defending his decision with a "hypothetical" path to profitability.

WeWork's bankruptcy filing in November 2023 is a stunning reversal of fortune for a company that reimagined offices as fun places to hang out with beer kegs and ping-pong tables but never turned a profit. The Covid-19 lockdowns and the slow return to offices further undermined demand for their services. WeWork's bankruptcy casts a shadow over the commercial real estate industry and raises questions about the investment strategies of SoftBank and its Vision Fund.

WeWork's co-founder Adam Neumann received billions from SoftBank and the Vision Fund

WeWork co-founder Adam Neumann received billions of dollars in investment from SoftBank and its Vision Fund. In 2017, WeWork confirmed a $4.4 billion investment from SoftBank and the Vision Fund, with $3 billion going directly into WeWork, and the remaining $1.4 billion invested into three subsidiaries: WeWork China, WeWork Japan, and WeWork Pacific. This funding gave SoftBank a major presence on WeWork's board of directors, with the addition of SoftBank vice chairman Ronald D. Fisher and external director Mark Schwartz, a former Goldman Sachs executive.

The investment from SoftBank and the Vision Fund lifted WeWork's valuation to an astronomical $47 billion in early 2019. However, just months later, investors were alarmed by the deep losses and conflicts of interest revealed in WeWork's IPO filings. WeWork's subsequent decline has cost SoftBank more than $11.5 billion in equity losses, with another $2.2 billion in debt still on the line.

The massive cash infusion from SoftBank and the Vision Fund played a significant role in inflating WeWork's valuation, which ultimately led to its decline and bankruptcy filing. The failure of WeWork has also damaged the professional reputation of SoftBank CEO Masayoshi Son, who overrode objections from his lieutenants to provide billions of dollars to the company.

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