SoftBank in talks to buy majority stake in loss-making WeWork - source

By Heather Somerville and Greg Roumeliotis

SAN FRANCISCO/NEW YORK (Reuters) - Japan's SoftBank Group Corp is in discussions to buy a majority stake in U.S. shared office space provider WeWork Cos, a source said, potentially doubling down on one of its biggest bets on a loss-making startup.

Pricing and other details have yet to be firmed up, the source said, adding that it was not a done deal.

A second source also said SoftBank is in talks about a major new investment in WeWork.

The Wall Street Journal reported earlier that SoftBank's investment could be between $15 billion and $20 billion and would likely come from SoftBank's Vision Fund. A smaller SoftBank investment under discussion earlier in the year valued WeWork at up to $40 billion, the Journal reported in June.

 

WeWork and SoftBank declined to comment. The sources spoke on the condition of anonymity as the details of the talks were private.

SoftBank and its Vision Fund invested $4.4 billion in WeWork last year and the Japanese company holds two board seats.

WeWork's prospects have been treated with skepticism by some Silicon Valley investors who see the company as an overvalued real estate play vulnerable to a property market downturn. In its first ever release of financial results in August, WeWork said its second-quarter losses mounted.

SoftBank shares fell 5 percent in Tokyo afternoon trading on Wednesday. Some traders said the news of the potential WeWork investment was negative for SoftBank, which has substantial exposure to the technology sector whose shares have been under pressure.

A majority stake in WeWork by SoftBank, which has raised more than $93 billion to create the technology-focused Vision Fund, would be a shift from its more common practice of taking minority stakes in high-profile late-stage startups.

SoftBank has invested billions of dollars in loss-making U.S. ride-services firm Uber Technologies but owns only a minority stake.

WeWork and the Japanese company are closely entwined, with hundreds of SoftBank staff using space at the two companies' Japanese joint venture and SoftBank considering moving its headquarters into WeWork offices.

SoftBank's other real estate-related investments include Compass, an online real estate marketplace, Katerra, a construction start-up, and Indian hotel chain OYO Hotels.

SoftBank CEO Masayoshi Son points to artificial intelligence as the common thread linking its portfolio companies, with that technology in the future able to drive vehicles, diagnose diseases and power financial services.

Eight-year old WeWork's business is growing rapidly, with second-quarter sales more than doubling from a year earlier. In September it surpassed JPMorgan, the biggest U.S. bank, as the largest tenant of Manhattan office space, highlighting growing demand for flexible leases.

WeWork's Chinese unit raised $500 million in July from investors including SoftBank, Hony Capital and Trustbridge Partners, to drive its expansion in that country.

(Reporting by Heather Somerville in San Francisco and Gregory Roumeliotis in New York; Writing by Sanjana Shivdas in Bengaluru and Sam Nussey in Tokyo; Editing by Peter Cooney, Edwina Gibbs and Muralikumar Anantharaman)