WeWork’s Non-IPO is awkward for Softbank investments in other ‘unicorns’, including Uber and Slack
The pause on WeWork’s IPO could see it shelved for as little as a month, if statements by top executives prove accurate. Among the most formidable of numerous obstacles though, is the office leasing group’s biggest backer, Japan’s SoftBank. Through its $97bn VisionFund unit and also directly, the telecoms-to-tech conglomerate pumped $10.65bn into WeWork over about 7 years. Yet as We Co.’s market launch approached, the tumbling valuation of its 29% holding triggered an unusual rift between sponsor and beneficiary. SoftBank made it known that it would prefer the IPO to be postponed. That ought to have sent a chill through CEO Adam Neumann, and others. Not just because SoftBank’s retreat played a large part in jeopardising WeWork’s market launch. Softbank’s cold feet also cast doubt on The We Co’s ability to tap stock markets anytime soon.
After all, palpable opposition to everything from We’s financial structure, governance and voting stock played a big part in forcing management to pull the IPO. And Wall Street’s animosity failed to subside, even after WeWork slashed valuation guidance, among other concessions. Yields on WeWork’s junk bonds have ramped sharply in recent days, a proxy of dwindling confidence. As such, if the market launch had gone ahead, investors, chiefly Softbank, which made its latest investment at a valuation of $47bn, would have realised punishing losses.
For SoftBank, which aims to launch a Vision Fund II in the medium term, that would have been impolitic, to say the least. But the investor still faced the embarrassment of seeing another high-profile investment coming unstuck. The WeWork debacle also shone a harsh light on the Japanese firm’s increasingly obscure investment strategy. The let-down underscores criticism that the fund lacks focus, and that its deep inventory of private holdings makes valuing it difficult. So, as the global investment community loses patience with one of the world’s biggest investors, WeWork’s IPO fail lengthens the shadow over the outlook for big techy IPOs.
The disappointment can only make life tougher for SoftBank investments that already made it the stock market. Only one of six Vision Fund-backed firms that have gone public trade above their IPO prices. Among the most high-profile misses, by Tuesday’s close, Slack and Uber traded some 36% and 25% lower than their prices at IPO. As the market mood towards ‘unicorns’ appears to toughen, the bias that has capped Uber and Slack shares looks to be toughening.
Quick thoughts on Uber chart
- The stock shows signs of having formed a bottom. It has maintained an uptrend for over two weeks
- However, proven resistance at $36.15 is close overhead – the underside of UBER’s first ever support
- Only a clean and sustained break above $36.15 can lighten the shares and offer the chance of their first proper rally
Uber Inc. CFD – Daily – 18:50 BST 18-09-2019
Source: City Index
Quick thoughts on Slack chart
- Similarly, Slack buyers will continue to see diminishing returns so long as the stock remains trapped in the declining channel that formed soon after its launch
- Like UBER, there’s been an upturn in more recent sessions, though indications are less optimistic for WORK
- The shares are below their sensitive 21-day exponential trend. As well, the EMA itself hasn’t yet interrupted its own fall
- At least WORK now levitates above its low of $23.94
- Only breaking above its current main structure would put and end to ongoing weakness
Slack Technologies CFD – Daily
Source: City Index