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WeWork's IPO filing reveals heavy losses in Asia

SoftBank entities committed $1.65bn for joint ventures across the region

A WeWork co-working space in Shanghai: Growing losses at the parent company's joint ventures in Asia have cast a shadow over its expected initial public offering in September.    © AP

NEW YORK/TOKYO -- The parent of U.S. shared workspace service WeWork has revealed heavy losses in its joint ventures across Asia, which are backed by SoftBank Group and its nearly $100 billion Vision Fund.

Details of the company's financial performance in Asia were revealed for the first time in a prospectus filed by The We Company on Wednesday.

In 2017 and 2018, entities related to SoftBank have invested or committed to invest $1.65 billion in the Asian joint ventures. That amount includes $650 million in China, $500 million in Japan and $500 million in Southeast Asia and South Korea.

The investments are part of $10.65 billion that SoftBank entities have committed to The We Company, underscoring the Japanese conglomerate's huge exposure to the loss-making business. SoftBank entities have amassed nearly 114 million shares in the parent company over more than 10 funding rounds, becoming its biggest external shareholder.

The Asian ventures reported a wider net loss of $169 million for the six months ended June 2019, compared with a $128 million loss the previous year. Overall, The We Company logged a net loss of $689 million in the six-month period, an increase of 10% on the year. Sales doubled to $1.53 billion.

The Asian ventures pay 8% of their respective revenues as a "management fee" to WeWork. In Japan, 4% is held to pay sales and marketing expenses incurred by SoftBank, according to the prospectus.

The We Company is expected to list its shares as early as September. The initial public offering will be the latest test of whether the Vision Fund's huge bets can withstand the scrutiny of public markets. SoftBank's investment in January valued The We Company at $47 billion.

Questions over The We Company's ability to stem its losses are likely to grow as the stock price of ride-sharing company Uber Technologies, another Vision Fund investment, has slumped since it went public in May. Uber incurred a record net loss of $5.2 billion in the April to June quarter.

SoftBank CEO Masayoshi Son has brushed off critics of WeWork, lauding its rapid expansion. "I think its high growth rate will continue for the next five to 10 years," Son said at a recent earnings conference.

In April, the New York-based company submitted documents in private to the Securities and Exchange Commission for approval of its plan to go public. Filing the prospectus allows The We Company to hold briefings for investors and solicit buyers for the IPO.

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