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SoftBank Backers Rethink Role in Next Vision Fund on WeWork

Gillian Tan and Giles Turner

(Bloomberg) -- The biggest backers of SoftBank Group Corp.’s gargantuan Vision Fund are reconsidering how much to commit to its next investment vehicle as an oversized bet on flexible workspace provider WeWork sours.

Saudi Arabia’s Public Investment Fund, which contributed $45 billion to the $100 billion Vision Fund, is now only planning to reinvest profits from that vehicle into its successor, according to people familiar with the talks. Abu Dhabi’s Mubadala Investment Co., which invested $15 billion, is considering paring its future commitment to below $10 billion, the people said, asking not to be identified in disclosing internal deliberations.

A partial retreat of the two anchor investors would complicate fundraising for SoftBank Chief Executive Officer Masayoshi Son, who upended venture capital by making huge bets on promising yet unproven companies and spurring others to follow suit. Perhaps more than any other startup, WeWork has come to symbolize that brash style, and the success or failure of its IPO is likely to impact Son’s ability to raise cash for future deals.

PIF executives are still considering options and no final decision has been made, one of the people said. A spokesman for the Saudi Arabian wealth fund declined to comment. Mubadala said discussions are continuing on whether or not any investment will take place. A representative for SoftBank’s Vision Fund didn’t immediately have a comment.

“The suggestion we have made any decisions on the size or timing of a potential investment is simply unfounded,” said Brian Lott, a spokesman for Abu Dhabi’s sovereign fund. “Our discussions continue at an appropriate and deliberate pace, given the importance of this effort.”

Sagging Valuation

The Wall Street Journal previously reported that Saudi Arabia’s sovereign wealth fund wasn’t planning to be a significant investor in the new fund but may still make a more modest commitment. A decision to only reinvest proceeds from the first fund would mark a significant shift. Saudi Arabia’s Crown Prince Mohammed bin Salman said last October that he planned to invest another $45 billion into any new fund.

“We would not put, as PIF, another $45 billion if we didn’t see huge income in the first year with the first $45 billion,” he said in an interview with Bloomberg.

WeWork is one of SoftBank’s flagship investments, along with Uber Technologies Inc., messaging software provider Slack Technologies Inc. and U.K. chipmaker ARM Holdings Plc. SoftBank, which with its affiliates, owns a 29% stake, and in January invested at a valuation of $47 billion, more than triple the $15 billion that’s currently being discussed in an IPO.

Tensions have erupted within SoftBank over how it has handled its investment in WeWork. The Vision Fund, along with PIF and Mubadala, scuttled a $16 billion investment early this year Son had championed. SoftBank ended up making only a $2 billion investment from its parent entity, rather than the Vision Fund.

SoftBank said in July that other investors had expressed interest in pledging a combined $108 billion for the second Vision Fund, though that was before WeWork forged ahead with plans for an IPO. The new fund is expected to collect money from Apple Inc., Microsoft Corp., Foxconn Technology Group and various Japanese financial institutions, with seven having signed memorandums of understanding to participate.

(Adds that talks are ongoing in fourth paragraph.)

--With assistance from Matthew Martin.

To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Giles Turner in London at gturner35@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Christian Baumgaertel, Sree Vidya Bhaktavatsalam

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