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SoftBank in talks to buy majority stake in WeWork: sources

The bank could be putting US$15b to US$20b from its tech-focused fund into the loss-making startup

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WeWork's prospects have been treated with skepticism by some Silicon Valley investors, who say the company is an overvalued real-estate play, vulnerable to a property market downturn.

San Francisco

JAPAN'S SoftBank Group Corp is in discussions to buy a majority stake in American provider of shared office space WeWork Cos, a source said, potentially doubling down on one of its biggest bets on a loss-making startup.

Pricing and other details have yet to be firmed up, the source said.

Another source corroborated this, saying that the bank is in talks about a major new investment in WeWork.

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The Wall Street Journal reported earlier that SoftBank's investment could be between US$15 billion and US$20 billion, and would likely come from SoftBank's Vision Fund.

A smaller SoftBank investment under discussion earlier in the year valued WeWork at up to US$40 billion, the newspaper reported in June.

WeWork and SoftBank declined to comment; the sources spoke on condition of anonymity as the details of the talks were private.

SoftBank and its Vision Fund invested US$4.4 billion in WeWork last year and the Japanese company holds two board seats.

WeWork's prospects have been treated with skepticism by some Silicon Valley investors, who say the company is an overvalued real-estate play, vulnerable to a property market downturn.

In its maiden release of its financial results in August, WeWork said its second-quarter losses mounted.

SoftBank shares fell 5 per cent in Tokyo afternoon trading on Wednesday. Some traders said the news of the potential WeWork investment was negative for SoftBank, which has substantial exposure to the technology sector, where shares have been under pressure.

A majority stake in WeWork by SoftBank, which has raised more than US$93 billion to create the technology-focused Vision Fund, would be a shift from its more common practice of taking minority stakes in high-profile late-stage startups.

SoftBank has invested billions of dollars in loss-making US ride-services firm Uber Technologies, but owns only a minority stake.

WeWork and the Japanese company are closely entwined, with hundreds of SoftBank staff using space at the two companies' Japanese joint venture and SoftBank considering moving its headquarters into WeWork offices.

SoftBank's other real estate-related investments include online real-estate marketplace Compass, construction startup Katerra, and Indian hotel chain OYO Hotels.

SoftBank chief executive Masayoshi Son points to artificial intelligence as the common thread linking its portfolio companies, with that technology in the future able to drive vehicles, diagnose diseases and power financial services.

Eight-year old WeWork's business is growing rapidly, with its second-quarter sales more than doubling from the year before. In September, it surpassed JPMorgan, the biggest US bank, as the largest tenant of Manhattan office space, highlighting growing demand for flexible leases.

WeWork's Chinese unit raised US$500 million in July from investors including SoftBank, Hony Capital and Trustbridge Partners, to drive its expansion in that country. REUTERS