San Francisco: SoftBank Group Corp. is continuing to push money into one of its biggest investments: WeWork Cos.
The New York-based co-working company signed a $3 billion warrant with SoftBank, WeWork said Tuesday in a discussion of its third-quarter earnings. SoftBank agreed to pay $3 billion to WeWork for the opportunity to buy shares before September 2019 at a price of $110 a share or higher, depending on whether WeWork goes public, is acquired or raises a $1 billion round before that date. No matter the outcome, the deal would value WeWork at least $42 billion, according to the company.
SoftBank is by far the biggest investor in WeWork, which was founded in 2010 and runs shared office spaces around the country. WeWork raised $1 billion from SoftBank in August in the form of a convertible note, which would convert to equity at varying share prices depending on the circumstances of WeWork’s next funding round. The warrant, which comes from SoftBank itself and not its Vision Fund, doesn’t affect the previous convertible note. WeWork’s most recent funding round, in which SoftBank invested about $4.4 billion in the company last year, valued the company at $20 billion, though in June a SoftBank executive said the company was raising money at a $35 billion valuation.
SoftBank is “the closest investor we have," and that makes it easier to raise capital from them, said Artie Minson, WeWork’s president and chief financial officer. “They have two board seats. You can go through a very quick process with them given they’re inside seeing all the momentum we have."
WeWork is privately held, but it has been giving regular informal updates on some financial metrics since April, when it sold $702 million in bonds rated as junk by credit agencies. The company lost $1.22 billion on $1.25 billion in sales in the first three quarters, including $482 million in sales in the third quarter. 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. In 2017, the company lost $933 million on $886 million in revenue, according to financial documents associated with its bond offering.
WeWork also touted its increased sales of office space to large enterprises, which tend to sign longer contracts. Deals with those companies make up 29% of WeWork’s revenue, compared to 25% at the end of the second quarter.