SoftBank invests $1.1b in WeWork amid membership drop | FI SENSE


SoftBank Group Corp. announced it is adding $1.1 billion to its WeWork commitment to revive its declining membership amid the coronavirus pandemic.

WeWork is an American commercial real estate company that provides shared workspaces for technology startups and services for other enterprises.

The new investment from SoftBank comes after its roughly $100 billion Vision Fund recorded losses after writing down WeWork’s valuation to $2.9 billion, down more than 90% from its $47 billion peaks. SoftBank has invested more than $10 billion in WeWork.

The investment signals “another sign of SoftBank’s continued support for our business boost”, according to Chief Financial Officer Kimberly Ross’s memo. The investment is in the form of senior secured notes.

“Covid-19 has had an impact on our business,” Ross wrote. While WeWork’s second-quarter revenue rose 9% to $882 million from a year earlier, that marked a decline from its $1.1 billion hauls in this year’s first three months. The company’s membership base fell 12% to 612,000 in the second quarter from that prior period.

One bright spot: “We’ve seen renewed demand from leading enterprise companies as they look for flexibility on a global scale,” Ross wrote. The proportion of enterprise members was 48% in the second quarter, a slight increase from the first.

The company has been focused on whittling costs after its initial public offering was shelved last year. Its cash burn — or free cash outflow — was $671 million in the quarter, due to $116 million in non-recurring restructuring expenses which included severance linked to layoffs. Still, the cash burn was less than the $1.3 billion in WeWork’s peak outflow in the fourth quarter of 2019, Ross noted.



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