SoftBank by far the biggest investor in co-working space, WeWork has agreed to pay $3 Bn to the company 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 Bn round before that date. Irrespective of the outcome, the deal would bring the value of WeWork around $42 Bn, according to the company.
Earlier, in August, WeWork raised $1 Bn from SoftBank 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.
Artie Minson, WeWork’s President and Chief Financial Officer said, “SoftBank is the closest investor we have and that makes it easier to raise capital from them. 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.”
Currently, WeWork is privately held, however, it has been giving regular informal updates on some financial metrics since April, when it sold $702 Mn in bonds rated as junk by credit agencies. Later, the company shared that they lost $1.22 Bn on $1.25 Bn in sales in the first three quarters, including $482 Mn in sales in the third quarter.
Despite losses, WeWork continues to raise funds and expand its operations with a strong business proposition as it taps on the great opportunity that lies in the co-working segment. Besides freelancers and small and medium-sized companies that yearn for better working environments, even large organizations are utilizing the facility, increasing the demand for more such spaces. As per a report, in global cities like London, New York and Chicago co-working spaces are expanding at an annual rate of 20 percent, making co-working an institutional part of the market. There are currently 14,411 co-working spaces in the world today and the number of coworking members will rise to 3.8 Mn by 2020 and 5.1 Mn by 2022. WeWork being one of the largest and oldest company in this segment gets an edge over the others and hence goes on to invest more in its business and capabilities. However, in this growing competitive segment, how it ensures a strong market share is something to look forward to.