Japanese conglomerate SoftBank Group has asked co-working space provider WeWork to postpone its proposed initial public offering (IPO).
The move comes amidst concerns over the valuation that can be achieved in a listing, multiple media reports said. The development was first reported by The Financial Times, citing unnamed sources.
Advisors of The We Company, the parent of WeWork, are still evaluating investor appetite for an IPO valuation between $15 billion and $20 billion, which would be less than half of the $47 billion valuation the company was given when SoftBank invested $2 billion.
SoftBank has invested about $10.65 billion in WeWork till now and holds around 31% stake. SoftBank’s Vision Fund invested at about a $20 billion valuation in early 2017 while SoftBank Group recently invested in WeWork in January at a valuation of $47 billion.
There's been a lot of scepticism around the $47 billion figure, which is forcing The We Company to cut down the IPO valuation to a little more than $20 billion because of its mounting losses.
An IPO at a $15 billion valuation would result in a $4 billion writedown for SoftBank and a $5 billion loss for the Vision Fund, the reports said.
WeWork, which owns or leases and rents office space to companies needing short-term space, had planned to hold a roadshow to promote the IPO as soon as this week, media reports mentioned.
WeWork has lined up a $6 billion credit line that is contingent on it raising at least $3 billion in an IPO, according to its prospectus.
The company is already considering additional financing and is planning to rely on junk bonds for funding for the near future, a company executive said in a meeting with analysts, The Economic Times reported, citing sources.