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Companies

WeWork's valuation plunges by more than half to $20bn

Masayoshi Son mulls increasing SoftBank's $10bn investment in office space broker

The parent company of WeWork, whose net loss surged 80% to $1.6 billion last year, might postpone its IPO until next year.

NEW YORK -- As the parent company of WeWork -- the U.S.-based provider of shared offices that Japan's SoftBank Group has wagered heavily on -- heads toward an anticipated initial public offering, its target valuation has fallen to around $20 billion, less than half where it was when it last raised funds, according to several U.S. media reports.

With investors beginning to cast a stern eye on the growth potential of the money-losing startup, reports say The We Company is considering whether to postpone its IPO until next year.

Expectations have been that the company will go public in New York later this month.

The last time The We Company raised funds, earlier this year, it was valued at $47 billion.

The IPO target valuation puts the company well below the $82 billion that ride-hailer Uber Technologies debuted at four months ago. The workspace provider is expected to begin investor briefings next week, and market attention is focused on how investors will react.

The Wall Street Journal reported in its online edition that Adam Neumann, CEO of The We Company, visited Japan at the end of August and met with SoftBank Group Chairman and President Masayoshi Son.

The SoftBank Group has invested more than $10 billion in the workspace broker.

According to the Journal report, Neumann and Son discussed multiple measures to boost The We Company's corporate value, including an additional equity investment from SoftBank.

WeWork's business model involves procuring office space in big cities around the world, then renovating the premises, and installing office furniture and equipment. Finally, it parcels out the space to freelancers, small-business owners, even corporate workers on short-term bases.

As of the end of June, WeWork had 527,000 tenants, up 30% from half a year earlier.

Around the world, property markets, especially in the U.S., are generally firm, with rents on the incline. But the global economy is stoking uncertainty, and there is concern that WeWork's revenues could decline significantly if the upward trend in rents turns south.

The We Company last month submitted a prospectus to the U.S. Securities and Exchange Commission, or SEC. According to the prospectus, WeWork's global customer base increased in 2018, and the company's sales doubled to $1.82 billion.

But the company's net loss surged 80% to $1.6 billion due to property procurement, sales promotion and other costs.

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