I mean they put in $2b in the last round, that's not exactly chump change!

https://www.reuters.com/article/us-wework-m-a-softbank/softb...

They almost definitely have liquidation preferences on that 2B.

> They almost definitely have liquidation preferences on that 2B

Automatic conversion clauses typically force convertible pref to convert to common in the event of an IPO. This makes liquidation preferences generally irrelevant to public offerings.

You can define arbitrary preference rules. For example, the conversion doesn't have to be 1-to-1.

In the case of Square's IPO, Series E preferred had a provision giving them extra free common stock to make up the gap if it IPO'd below $18.55 (which it did).

You can, and I may be wrong here, but I seem to recall that one has to call out these sorts of options in the S-1. It is material to people investing in the IPO.

Well that's a different thing than what the OP claimed (marking up an investment with a tiny secondary round). They marked it up with a giant round!

>marking up an investment with a tiny secondary round

Maybe a $2B round is tiny in the face of annual losses of $1.9B which was 2x the loss from the year before.

Who really knows anymore, maybe doubling your losses is just another metric VCs can spin as positive growth. After all the Unicorn IPO mantra seems to be, but we can stop our billion dollar losses whenever we want and then its all profits.

At least they tried to clean up Uber before the IPO. This thing just seems really sloppy on multiple fronts.

Yea the ceo seems a bit of an egotistical guy, and felt we work was so awesome the “retail” markets would look past the shenanigans. He was wrong, and he’s back pedaling to salvage it. First the trademark payment, now this. Hopefully he will also clean up the corporate structure and his voting power (but prob not).

He already sold $700M worth. [1] I'm not sure he cares anymore.

[1] https://techcrunch.com/2019/07/18/wework-ceo-adam-neumann-ha...

>and the over $100 million that Mark Pincus took off the table ahead of Zynga’s offering.

Damn, I know someone who got screwed over by the IPO lockup there.

It's not ego, it's greed.

So basically a huge pump and dump

> So basically a huge pump and dump

Softbank have been transparent from the start. When Uber did its split round, even on HN, a number of commenters were convinced the spread was legitimate. That the top-of-the-stack pref was actually worth 2x the next-in-line pref. The media fetishised the post-money valuation, and the details got lost in the conversation amongst uninformed investors.

But did they break any laws? Can SEC or AG cone after them? AFAIK they dont even have US presence right? Its all China owned??

??

Softbank is a Japanese holding company.

Organizations making large investments in US companies and US markets are absolutely subject to US securities laws.

Not accusing them of breaking laws. Just manipulating the valuation knowing it's not supportable.

> Buying secondary shares at X, making a tiny investment at 2X, and then claiming the company is worth 2X.

It should be possible to figure out the formula for how much an investor needs to invest in a given round, given a previous investment into the company, such that the downside of investing at an increased valuation exceeds the upside of the existing shares being valued higher than before.

In other words: How much would SoftBank need to invest such that it wouldn’t benefit from bluffing on the valuation?

I believe it would depend on the liquidation preferences and the preferred stack. This would allow them to potentially own most of the company in the event it was acquired for a worse valuation, went bankrupt, etc.