Internet and telecommunications group SoftBank expects to book a ¥700bn ($6.6bn) loss on its investment in US-based workspace provider WeWork in the year ending March 2020, it revealed today.
The loss represents the cash supplied by SoftBank outside of its Vision Fund, which has also invested in the company. It makes up part of a larger ¥1 trillion ($9.4bn) loss connected to similar investments that SoftBank scaled up from a previous estimate of ¥800bn.
WeWork was set to go public in September 2019 before negative publicity and a projected valuation far below the $47bn valuation at which it had last raised funding, when SoftBank invested $2bn in January the same year, led to the initial public offering being withdrawn.
SoftBank subsequently put together a $9.5bn financing package in October that was meant to include debt financing as well as a secondary share tender that would value the company at $7.5bn to $8bn. It is that package that likely makes up a large proportion of the projected loss.
The corporate has since walked back from the $3bn secondary tender it agreed, citing a failure of WeWork to fulfil pre-agreed conditions, in turn leading to threats of legal action from other shareholders.
SoftBank said in a statement the increased loss estimate was a result of an updated fair value assessment of its loan commitment and guarantee contract for WeWork. That could well be related to WeWork having to close down operations across the world in the face of the Covid-19 pandemic.
News of the loss comes after SoftBank revealed earlier this month that it expects to book a $16.8bn loss from Vision Fund – which has also provided billions of dollars in equity funding for WeWork – over the same fiscal year.
