SoftBank Bets Big on WeWork. Again.

WeWork’s booth at TechCrunch Disrupt in Manhattan in 2017. Recent investments give WeWork an implied valuation of just over $20 billion.

SoftBank is increasing its ownership stake in WeWork yet again, investing a further $2 billion in the fast-growing co-working company, according to three people familiar with the deal.

But the deal, which is likely to be announced this week, is far smaller than an investment that was recently under consideration and could have been worth some $16 billion, the people said. They spoke on the condition of anonymity because they were not authorized to talk about the deal publicly.

The latest investment — which is coming from SoftBank itself, not its nearly $100 billion Vision Fund — values WeWork at $47 billion, and brings SoftBank’s total investment in WeWork to about $10.5 billion, they said.

SoftBank, a Japanese telecom conglomerate led by the billionaire Masayoshi Son, is reinforcing its commitment to WeWork even as the complex relationship between the two companies is under growing scrutiny.

SoftBank now has multiple investments in WeWork, including equity positions, warrants and joint ventures. Much of its capital in WeWork is from the SoftBank Vision Fund, which is largely backed by the Public Investment Fund of Saudi Arabia.

Yet after the killing of the journalist Jamal Khashoggi, which American intelligence agencies believe was directed by the Saudi crown prince, Mohammed bin Salman, many in the technology industry are reassessing their willingness to take money from the kingdom.

WeWork has emerged as one of the most valuable private companies, even as it continues to lose money. Though WeWork is the clear leader in the emerging co-working industry, it is essentially a commercial landlord, sprucing up office space and leasing it back to commercial clients.

In August it reported that it had more than 250,000 paying members, more than double the figure from a year earlier. It is also expanding its enterprise business, leasing large offices to companies like Amazon, Pepsi and Salesforce.

Yet WeWork continues to spend far more than it makes. It reported a loss of $723 million for the first half of last year as it built new co-working spaces around the globe. That old-school business model has led many analysts to believe that WeWork is wildly overvalued.

“The valuation is going to take a significant amount of growth to justify it,” said Alex Snyder, senior analyst at CenterSquare, a real estate investment firm in Philadelphia.

Nonetheless, Mr. Son has emerged as one of WeWork’s biggest boosters. As recently as last month, SoftBank was considering a larger investment in WeWork, according to the three people with knowledge of the deal. Under one possibility, SoftBank would have spent $10 billion to buy out all of WeWork’s other investors and injected $6 billion more in the company.

But several factors led to a smaller deal, they said. SoftBank proceeded with an initial public offering of its mobile unit in Japan, only to watch shares slide. Market volatility worldwide caused investors to be more cautious. And other WeWork investors were reluctant to sell too many of their shares to SoftBank.

The result was a deal, earlier reported by The Financial Times, for SoftBank to invest $2 billion more into WeWork.

That brings SoftBank’s total investment in WeWork to $6 billion in the last six months. In August, SoftBank put $1 billion into the company. And in December, SoftBank spent $3 billion for a warrant that gave it the right to buy additional equity in WeWork.

In 2017, SoftBank invested about $4.5 billion in the company with a web of deals. It spent $1.3 billion to buy shares from WeWork investors and employees. It injected some $1.7 billion to bolster WeWork’s balance sheet. And SoftBank spent $1.5 billion to take major positions in WeWork’s subsidiaries in Japan, China and the Pacific region.

“They’re our closest partner, and they’ve been extremely supportive,” Artie Minson, WeWork’s president, said of SoftBank in an interview.

About $5 billion of the recent investments will go to shore up WeWork’s balance sheet. Much of those funds will be available to WeWork this year, but as much as $1.5 billion will be held back until 2020, according to the three people.

“They are vastly outspending their cash flow position to sustain their growth,” Mr. Snyder said. “You can do that as long as people are willing to give you the money.”

About $1 billion of the new investments will be used to buy shares from investors and employees, who will get a chance to cash out. Investors and employees who do sell stock to SoftBank will have their shares valued in the mid-$50s, giving WeWork an implied valuation of just over $20 billion.

As WeWork continues its costly expansion plans, it could remain reliant on investors like SoftBank for support. SoftBank, meanwhile, may need to continue supporting WeWork to ensure that the start-up can live up to its lofty expectations.

“SoftBank will continue to give them money to justify the money they’ve already put in,” Mr. Snyder said.

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