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SoftBank to take control of WeWork: Sources

cnbc.com

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Re: SoftBank to take control of WeWork: Sources

#161

Post by dodobirdlord »

semi-extrinsic wrote: post #138
dfcowell wrote: post #123

Earlier quoted context omitted.

The $5b is coming from SoftBank Group. The earlier $11b came from the Vision Fund, which is a subsidiary with an entirely different operating environment.

Sure, but it still means somehow Masayoshi Son (and the investors whose money he manages) has paid $16bn for a thing now worth $8bn.

Assuming WeWork ends up being worth $5B+, it's kinda impressive that Masayoshi Son comes out of this with Softbank owning much of WeWork and the Vision Fund investors being the ones getting burned.

Re: SoftBank to take control of WeWork: Sources

#162

Post by dodobirdlord »

ksec wrote: post #144
TuringNYC wrote: post #133

Earlier quoted context omitted.

I'm utterly confused on how Neumann walks away with so much. Given the burn rate and the capital requirements, I cant imagine many other players who can step in at this point. And if no one steps in, the firm is worth zero. So isnt this a recapitalization of the firm? Why would they need to pay $200M for control if the alternative is some variation of bankruptcy followed by a firesale and cheap buy?

>So isnt this a recapitalization of the firm? Why would they need to pay $200M for control if the alternative is some variation of bankruptcy followed by a firesale and cheap buy? Because it is obvious if they do Firesale and Cheap buy they would have destroy the company and buy something that everyone knows isn't remotely worth that much. By trying to save it now they could at least get back some of its investment v…

They could probably sue him. As a member of the board of directors he still has an obligation to act in the interests of the shareholders even if he controls a majority of the votes.

Re: SoftBank to take control of WeWork: Sources

#163

Post by Nadge »

perl4ever wrote: post #115
rgbrenner wrote: post #104

Earlier quoted context omitted.

His entire net worth can be accounted for with Softbank's investment of $20m in Alibaba in 1999. That's now worth ~$110B... and he has a 21% stake in softbank. Remove that.. and he's at 0 or even negative. Is that luck or skill?

Reminds me of Bill Ackman and General Growth Properties.

In what way, please? I only know about Ackman through his Don Quixote-esque battle with Herbalife. What happened with GGP?

Re: SoftBank to take control of WeWork: Sources

#164

Post by dodobirdlord »

JohnJamesRambo wrote: post #128
hn_throwaway_99 wrote: post #27

Earlier quoted context omitted.

Furthermore, according to https://craft.co/wework/funding-rounds , WeWork has already received $12 billion plus in equity investments (not counting debt raises). Softbank alone has already put in $9.4 billion in equity + $1 billion in debt. So it looks like they've already destroyed $4 billion+ in value. I'm curious how the more financially astute than I see this as anything besides throwing good money after bad?

It seems like they haven’t even read the Wikipedia for Sunk Cost Fallacy. In case any SoftBank homies are reading this, here you go. You are investing in the Concorde. https://en.wikipedia.org/wiki/Sunk_cost

I don't think that's really relevant here. The $11B is sunk, the question is whether buying control of WeWork is worth $5B.

Re: SoftBank to take control of WeWork: Sources

#165

Post by dodobirdlord »

anm89 wrote: post #49

Serious question: given the monstrous scale of softbank, the not so great quality of many of its holdings, and it's ties into multiple world economies, could softbank be a systemic risk to the entire world economy? If Uber took a big write off at this point, not only would American and Japanese companies and Saudi Arabia take major losses but I would imagine big tech stocks in general would start to see a loss in con…

> I would imagine big tech stocks in general would start to see a loss in confidence and a reversion to more normal P/E ratios.

Most of the big tech companies have not particularly strange P/E ratios.

> I would imagine at that point softbank would be such a dirty word that it would have to firesale as well.

What's the mechanism here? Uber takes a large writedown leads to Softbank declaring bankruptcy? I don't follow the reasoning.

> Do I have an overly active imagination? Does anyone else worry about this kind of stuff?

Yes and no.

Re: SoftBank to take control of WeWork: Sources

#166

Post by wastedhours »

cookie_monsta wrote: post #73

I don't really get the ongoing obsession with We/Softbank. I kind of got the whole schadenfreude side of it when it all came tumbling down but now it's just turned into a story of a big company trying to dig itself out of a hole created by some dumb decisions it made. Is there some larger relevance that I'm missing?

> some dumb decisions

I think the relevance is in the definition of some.

Lots of people had an inkling it was a lot of smoke and mirrors, "tech company this" "we're a platform that", with a lot of weirdness alongside - but then the IPO dropped and confirmed every single assumption and it turned out truth was more ridiculous than fiction.

The larger relevance is how completely unworthy businesses are sprung into a position by cheap VC cash when the foundations are made of custard and spaghetti. Wrap in the "cult of personality" with a seemingly deluded founder and you have the SV equivalent of a soap opera.

Alongside that, it's also a dramatic pantomime as to how said investors are trying to optimise an acquisition without the optics of a failing business. We was a poster child for the Vision Fund, and Softbank has to play this game delicately.

It's fascinating to watch it play out - this isn't just a case of a large business that's fallen on hard times. This is a story about a (hopefully) unique company that should never have worked in the first place, somehow navigating a black swan moment, and potentially turning into a real business.

Re: SoftBank to take control of WeWork: Sources

#167

Post by Traster »

cookie_monsta wrote: post #73

I don't really get the ongoing obsession with We/Softbank. I kind of got the whole schadenfreude side of it when it all came tumbling down but now it's just turned into a story of a big company trying to dig itself out of a hole created by some dumb decisions it made. Is there some larger relevance that I'm missing?

Wework and softbank are interesting because they pretty much show you the limits of private equity and tech disruption. Wework was so far away from technology it was fascinating to see the story around it and how it ran its business. Softbank is really interesting because of their role, the unique position its in because of how deep its pockets are, and how the timing of WeWork's story has interacted with SoftBank's raising for the Vision fund. If you want to see how crazy things in PE can go, you can make a good argument that you should be looking at Softbank - with their positions in ARM, uber, Alibaba, Boston Dynamics, Slack, Wag. I mean, we can have an entire conversation about Wag.

But also, this story isn't over. This story has been almost an unmitigated catastrophe for the last year and yet this news is telling you that Softbank think that WeWork is currently still the most valuable company in the office rental space despite everything. It also tells you softbank isn't just funded a tonne of companies and are willing to let them go big or collapse - they don't seem able to walk away from WeWork. The reason this is interesting is because this is now raising big red flags about how Softbank's investment portfolio is looking - and it'll be interesting when we hear whether they start to suffer because of it.

Re: SoftBank to take control of WeWork: Sources

#168

Post by goatinaboat »

dodobirdlord wrote: post #160
goatinaboat wrote: post #148

Earlier quoted context omitted.

Does WeWork ever need to IPO? Yes. The Vision Fund, like all VC funds, has a finite lifespan that all the investors agreed to when they funded it.

True, but there's always the possibility of the Vision Fund selling WeWork to Softbank proper. And I don't think this round of investment is from the Vision Fund, so it appears that Softbank proper is going to end up with a larger stake than the Vision Fund already. I suppose there's also always the option of selling WeWork to Berkshire Hathaway or something if they can get it boring and profitable.

the possibility of the Vision Fund selling WeWork to Softbank proper.

I suppose it’s theoretically possible but Vision Fund invested $10.5Bn in WeWork expecting a multiple of that back for Vision Fund investors. Where will SoftBank get that kind of money?

Re: SoftBank to take control of WeWork: Sources

#169

Post by Danieru »

dodobirdlord wrote: post #161
semi-extrinsic wrote: post #138

Earlier quoted context omitted.

Sure, but it still means somehow Masayoshi Son (and the investors whose money he manages) has paid $16bn for a thing now worth $8bn.

Assuming WeWork ends up being worth $5B+, it's kinda impressive that Masayoshi Son comes out of this with Softbank owning much of WeWork and the Vision Fund investors being the ones getting burned.

Except the vision fund is structured as debt for the outside money. Softbank takes the profit and loss minus interest payments on the debt. Thus the vision fund is more like a leveraged softbank.

Re: SoftBank to take control of WeWork: Sources

#170

Post by C1sc0cat »

acchow wrote: post #45
paulsutter wrote: post #32

Earlier quoted context omitted.

WeWork had so many excesses, like paying 100% commission to real estate agents. Softbank can cut out such nonsense, not just the tequila and private jets. Softbank also has full access to the company’s financials and will be in a position to restructure. It’s safe to say they are a lot better informed than we are.

> like paying 100% commission to real estate agents. Why did they do this?

Related party deals We Works previous C level execs had interests in the property We Work took leases in.
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