The wheels come off when anyone else gets to value the investment. That’s happening now. I wonder how other SoftBank businesses like ARM will be impacted.
I don't think many investors dispute the ~$28b valuation that Softbank paid for ARM.
An IPO at $20bn, that may tank afterwards, would really hurt their paper profits.
I'd love to know how throwing good money after bad would shore up the faith in the rest of the portfolio?
"No one else wants this, but we can't afford to mark-to-market, so we're going to throw more money in with the hopes of maintaining an illusory valuation."
At the end of the day, it's a bad business. Can't fake your way out of it.
I mean, I'm just throwing something out there - I can't see how they were funded in the first place...
But, there's definitely a scenario where We taking a 50% haircut after several large-scale late rounds led by one prominent fund could lead to other companies valued at a level by the same late stage fund being valued less. The optics of that to other investors, whilst common for a lot of funds, at this late stage could raise some eyebrows.
$3bn to maintain We's valuation on the private market might mitigate against several multi-$bn write downs across the portfolio, especially if they're planning IPOs as well.
No idea if it's a decent strategy, but this is VC we're talking about...
That's a hell of a big bet. It's not hard to imagine Softbank will do whatever it can, rational or not, to try to get WeWork to a point where they can cash out.
I agree: they'll do something. But having to pour money into a company that just blew its IPO because the business is terrible...well, not sure the market as a whole can see that as anything else but "we're f-cked!"
All that being said, someone needs to be mentoring the CEO, like right now. That S1 was... not... great.