WeWork's largest outside shareholder -- SoftBank’s Masayoshi Son had last year said he is “embarrassed” by his track record as his bets on Uber and WeWork didn’t pay off as expected.
Beleaguered coworking company WeWork is perhaps turning out to be a classic example of what happens when a dominant investor single-handedly tries to call the shots to boost the company’s unbridled pace of growth at any cost. While its largest outside shareholder — SoftBank’s Masayoshi Son had last year told Nikkei Business magazine that he is “embarrassed” by his track record as his bets on Uber and WeWork didn’t pay off as expected, the latter’s another investor T. Rowe Price has now admitted it to be a “headache” and a “terrible investment”. The US-based asset management firm was among several backers that suffered due to the failed public listing of WeWork.
T. Rowe Price, which started funding WeWork in 2014 with its Series D round valuing the company at $4.65 billion, said in its Mid-Cap Growth Portfolio annual report that WeWork “unfortunately, has since caused us outsized headaches and disappointments.” The funding was made on an understanding with WeWork that it would “slow the company’s blistering pace of growth and focus instead on developing a more sustainable business strategy.” Later the company got onboard SoftBank as its investor and the promise made to T. Rowe price was kept aside to go all out for growth that eventually burst late last year. “They took our advice for a few months, but new investors soon arrived who convinced management to put its foot back on the accelerator,” T. Rowe Price said in the report as seen by Financial Express Online.
The company’s massive losses had ballooned to $1.25 billion in its third-quarter as it outpaced revenue that stood at $934 million. This is despite the promise of profitability in sight made by WeWork CEO to T. Rowe Price. “We did not take him (CEO) at his word, and we communicated to WeWork’s management and board our displeasure with its eroding corporate governance.” While T. Rowe Price had sold around 16 per cent of its shares in WeWork in 2017 and 50% of its initial investment in 2019, it was about to sell its remaining shares to a large investor in 2019. However, WeWork’s management didn’t approve the deal. What followed was the failed IPO that left T. Rowe’s “remaining shares worth a fraction of their earlier valuation.”
The investor said it is ready to declare WeWork a “terrible investment” as it “misread the motivations” of WeWork’s management and its investment partners. “In short, we believe the WeWork debacle was an error in judgment, not in process,” T. Rowe Price said. WeWork raised nearly $11 billion from SoftBank while its valuation had shot up from earlier $20 billion after SoftBank put invested $3 billion and $2 billion in WeWork in November 2018 and January last year.