SoftBank Slides to 10-Month Low After Unveiling WeWork Bailout

Pavel Alpeyev, Bloomberg News

Pedestrians walk past signage for SoftBank Group Corp. outside a store in Tokyo, Japan, on Thursday, Nov. 29, 2018. SoftBank's 2.4 trillion yen ($21 billion) initial public offering of its Japanese telecommunications unit has successfully secured sales for the bulk of its shares to individual investors, people familiar with the matter said. Photographer: Kiyoshi Ota/Bloomberg , Bloomberg

(Bloomberg) -- SoftBank Group Corp. slid to its lowest since January after unveiling a $9.5 billion bailout for WeWork, as investors pondered the upshot of acquiring 80% of the debt-riddled American shared-office startup.

The stock slipped as much as 3.2% to 4,057 yen in Thursday morning trade, extending a 2.5% decline during the previous session. On Wednesday, WeWork announced it had secured a rescue package from SoftBank, capping one of the more dramatic business debacles in recent memory.

SoftBank is due to report results Nov. 6. WeWork’s shrunken valuation -- now roughly $8 billion from an eye-popping $47 billion at its peak -- and declines in shares of portfolio companies such as Uber Technologies Inc. may force SoftBank to book as much as a 500 billion yen ($4.6 billion) valuation loss, Mizuho Securities analyst Yusuke Hori wrote in a report. But the analyst maintained his buy rating on the company, saying its shares are cheap on a sum-of-parts calculus that includes SoftBank’s stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

The deal with SoftBank, which includes $5 billion in new financing and an acceleration of a $1.5 billion existing commitment, grants a reprieve to WeWork parent We Co., which was on track to run out of money as soon as next month. The capital infusion doesn’t give SoftBank a majority of voting rights and WeWork will be treated as an associate, not a subsidiary. That might allow the Japanese company to wield influence at WeWork without having to show all of its liabilities on the balance sheet.

The deal hasn’t closed however. SoftBank will file in the coming weeks for approval from the Committee on Foreign Investment in the U.S., according to a person familiar with the plans. SoftBank, which is based in Tokyo but invests globally, has run into issues with the agency in the past and a review could be a hurdle to closing the deal.

SoftBank’s founder, Masayoshi Son, said in Wednesday’s statement he was doubling down on the American outfit because he believed “growth challenges” were normal for any would-be disruptor. The investor certainly appeared unconcerned -- Son, an avid golfer, was on the links with Tiger Woods and Zozo Inc.’s billionaire founder Yusaku Maezawa at a celebrity tournament when news of the bailout dropped.

--With assistance from Takahiko Hyuga.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum Murphy