Published On: Tue, Nov 13th, 2018

SoftBank invests Another $3 Billion in WeWork

In part of a current financing round of $3.5 billion at a value of $42 billion, WeWork's biggest investor SoftBank invests another $3 Billion

 

WeWork has secured an additional $3 billion of funding from its biggest investor SoftBank’s Vision Fund. This is part of a current financing round of $3.5 billion at a value of $42 billion for WeWork.

Softbank has already invested $4.4 billion in WeWork in 2017 and has two members on its board of directors. The Japanese corporation’s $93 billion fund usually buys small shares from startup companies that are in an advanced stage.

The New York-based co-working company is privately held, but it has been giving regular informal updates on some financial metrics. In a discussion of its third-quarter earnings on Thursday WeWork said it has signed a $3 billion warrant with SoftBank.

According to the company, SoftBank will inject the funding in exchange for enabling it to buy new WeWork shares by the end of September 2019, at a price that will lift WeWork valuation from the $20 billion reached in last equity funding round to at least $42 billion. It can be done by IPO, be acquired or raises a $1 billion round before September.

WeWork, which was founded in 2010 by Israeli entrepreneur and CEO Adam Neumann, doubled EBITDA without expenses for investment in growth engines in the quarter to $ 41 million. The overall adjusted EBITDA was negative in the quarter at $ 168 million, compared to a negative EBITDA of $ 45 million in the parallel quarter, as the company continues to spend large sums on business development, marketing and sales, discounts to tenants and new subscribers, and other items.

In the bottom line, the company posted a net loss of $ 400 million, compared with a net loss of $ 160 million in the corresponding quarter last year.

In the first nine months of the year, the company posted revenues of $ 1.25 billion, 96% more than in the corresponding period. However, the overall adjusted EBITDA was negative at $ 416 million, compared to a negative EBITDA of only $ 108 million in the corresponding period.

On September 30, WeWork had $ 2.8 billion in cash and $ 6.4 billion in investment commitments.

The company shows in its presentation that it currently operates in 24 countries, 83 cities and 335 workplaces. The number of its subscribers more than doubled from 154,000 at the end of the third quarter of 2017 to about 319,000 at the end of September 2018, of which half were outside of North America. During the last quarter, its subscriber base grew by 51,000. The occupancy rate of the Company’s assets was 84% at the end of September.

WeWork focuses on capturing the gap between the long-term rent it pays the property owners and the short-term rent it collects from its customers, which include freelancers, various professionals and teams of large companies.

The income of the joint-venture rental company, which is in accelerated growth, more than doubled in the first half of 2018 to $421.6 million. This coincided with a jump in the number of customers, from 128,000 a year ago to 268,000 at the end of June. However, the loss in the first nine months of the year reached $1.1 billion.

If the company kept up its September sales pace for the next 12 months, it said, its revenue would exceed $2 billion for the year.

 

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