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- WeWork is seeing a growing amount of revenue from SoftBank, which is also its biggest investor.
- SoftBank accounted for 2% of WeWork’s revenue in the first six months of this year, up from nearly 0% in 2017.
- WeWork has drawn criticism for its extensive series of deals involving so-called related parties — employees, executives, investors, and their family members.
- For a number of factors — including these types of transactions — the company has been struggling to pull in investors for its planned initial public offering.
- Read all of Join the financial binary options‘s WeWork coverage here.
SoftBank, which is WeWork’s biggest backer, has also become an increasingly important customer of the commercial real-estate company.
The Japanese conglomerate accounted for 2% of WeWork’s revenue in the first 6 months of this year, according to documents the latter filed in preparation for its planned public offering. That portion was up from just 1% for all of last year and nearly 0% in 2017.
The company also counts Rhône Group, another one of its investors, as a customer. But Rhône accounted for a much smaller portion of WeWork’s revenue.
“We have entered into membership agreements and/or other agreements relating to the provision of Powered by We solutions with SoftBank entities and affiliates of the Rhône Group,” WeWork said in its IPO paperwork. “We believe that all such arrangements have been entered into in the ordinary course of business and have been conducted on an arm’s-length basis.”
WeWork’s Powered by We service involves building out and managing office space that other companies own or have leased.
SoftBank declined to comment. Representatives of WeWork did not respond to an email seeking comment. Rhône Group did not immediately respond to an email seeking comment.
WeWork is seeing more revenue from SoftBank
In the first six months of this year, SoftBank paid WeWork $28.2 million for leases and other services, according to WeWork’s IPO filing. For all of last year, the Japanese company paid WeWork $18.8 million for such services, according to the filing. In 2017 and 2016, SoftBank paid the real estate company about $200,000 and $100,000, respectively.
The ramp-up in WeWork’s SoftBank revenue followed SoftBank’s investment in the company. SoftBank took its first stake in WeWork in an August 2017 funding round, according to PitchBook. It has invested $10.65 billion in total in WeWork and is reportedly planning on buying another $750 million worth of its stock in the IPO.
Read this: Venture investors still aren’t sure what to make of SoftBank’s $100 billion Vision Fund. Depending on who you ask, they’re either rooting for it, or gleeful that it’s struggling with WeWork and Uber.
Ron Fisher, SoftBank’s vice chairman, sits on WeWork’s board of directors.
Meanwhile, Rhône Group paid WeWork $1.3 million in all of 2018 and $1.1 million in the first half of this year for leases and other services.
Rhône is a partner with WeWork in a real estate venture designed to acquire buildings that WeWork will lease out to customers. Its cofounder, Steven Langman, is a WeWork director.
WeWork has come under fire for its long list of so-called related-party transactions, which are deals involving employees, executives, investors, or other people that could create conflicts of interest. The company has hired relatives of CEO Adam Neumann, given Neuman numerous large loans, and rented space in buildings he partially owned. WeWork also reportedly struck deals with the family members of other top executives, including hiring the parents of Vice Chair Michael Goss as real-estate brokers for a lease in Miami.
The coworking giant has struggled to line up investors for its public offering. Potential investors are reportedly worried about these related-party transactions, its valuation, business model, and potential resilience in an economic downturn.
WeWork is reportedly considering going public with a market capitalization of $10 billion. SoftBank valued the company at $47 billion in January when it made its most recent investment in WeWork.
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SEE ALSO: Why WeWork’s $47 billion private valuation could be a key stumbling block for its IPO — and might even derail it completely
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