The co-working industry has seen its share of ups and downs during the COVID-19 pandemic as more businesses have converted to a telework environment. While WeWork has had its share of lows even before the pandemic—a failed initial public offering (IPO) and co-founder and Chief Executive Adam Neumann stepping down—the flexible office space provider has seen some recent financial success, even if major investor SoftBank isn’t sharing the news, according to TechCruch.
SoftBank’s not touting WeWork’s recent successes
WeWork hasn’t been a part of SoftBank’s recent presentations even though its one of the biggest investments in the company’s $98.6 billion Vision Fund. The flexible office space provider was also absent in SoftBank’s quarterly update and its investor presentation. Meanwhile the WeWork logo isn’t prominently displayed on the SoftBank portfolio page—it’s just one of many.
SoftBank’s desire to hide WeWork would make sense if the co-working company were still mired in its financial woes from a couple of years ago. Its results have shown the opposite, however. SoftBank recognized a $1.36 billion improvement in various credit facilities for WeWork, TechCrunch reports. That figure was an improvement compared to the first quarter of 2020.
Meanwhile, SoftBank hasn’t had to reach into its financial reserves like it thought might have to regarding WeWork. The company had set aside capital to cover WeWork’s rent and mandatory loan payments to better position the co-working firm’s financial picture. It turned out that additional capital wasn’t necessary—at least for now. SoftBank said, “mainly due to improvement in the credit risk of WeWork”, those loans’ risk profiles have improved and it doesn’t feel like it has to offer such a big financial cushion as did during the prior nine months.
Reason for WeWork’s improvement?
WeWork’s current financial turnaround could be the result of good accounting. There’s also the possibility that recent rumors of WeWork going public again could have something with the co-working company suddenly looking like less of a financial risk. The Wall Street Journal recently reported that WeWork was in talks with a SPAC (special purpose acquisition company) to help take the company public.
The WeWork board and company Chief Executive Sandeep Mathrani have reportedly been reviewing offers from a Bow Capital Management-affiliated SPAC and another unknown entity for several weeks, according to people familiar with the situation. A deal could potentially secure WeWork a $10 billion valuation. There’s also a chance WeWork could receive funding in another private investment round.
“Over the past year, WeWork has remained focused on executing our plans for achieving profitability,” WeWork Chief Communication Officer Lauren Fritts said in a statement. “Our significant progress combined with the increased market demand for flexible space, shows positive signs for our business. We will continue to explore opportunities that help us move closer towards our goals.”
The $10 billion valuation is below what WeWork reached less than two years ago—it was privately valued at $47 billion after SoftBank’s investment—but it’s still a good sign that the co-working company is looking less like a financial liability. Which raises the question why SoftBank isn’t more vocal about WeWork’s recent financial improvement. Sell the sizzle not the steak? Don’t open your mouth until you have something to say? Stay tuned for more WeWork news.
Joe Dyton can be reached at email@example.com.