The SoftBank Vision Fund is pushing pause on its investments of expensive startups, which is good for the fund, but might be troubling for companies that were relying on its generosity.
WeWork, the massive coworking office provider, seems to be the big player affected by this. SoftBank’s founder Masayoshi Son and his Gulf region backers were expected to invest somewhere between $15 billion to $20 billion on a majority stake into the shared office provider. That figure has reportedly dropped to $2 billion and the Vision Fund itself is no longer apart of the deal.
Despite this, SoftBank has already invested $4.4 billion into WeWork with the Vision Fund, so this shift should not be seen as a total loss.
The fact that SoftBank’s shares have risen almost 6% due to this smaller investment shows investors are relieved about this decision.
WeWork’s $20 billion valuation seems to be steady, but since the Vision Fund’s model is dependent upon investing huge sums of cash into quickly growing companies, WeWork may no longer fit the bill.
WeWork’s valuation only works if it continues to grow at double-digit rates, while also keeping its rental prices reasonably priced.
The Vision Fund’s investors want to focus on technology bets and no longer thinks WeWork is a viable technology company, but simply a real estate enterprise.
Aside from SoftBank’s valuation, the market has different ways of judging the future of WeWork. The company recently issued a seven-year unsecured high-yield bond which has since dropped 14% in value. Investors are second-guessing the shared office provider that has relied heavily on confidence.
This may be a turning point for the coworking sector of the commercial real estate market.