WeWork and Uber Deal Blows to SoftBank's Vision Fund

The We Company is reportedly considering knocking its valuation way down. On the other side of its IPO, Uber is having a tough time.

What connects the two? They're big SoftBank Vision Fund 1 bets. And WeWork's trials and Uber's tribulations are becoming SoftBank's Titanic just as it gears up for Vision Fund 2.

Let's start with We

In January, SoftBank upped its investment in WeWork by $2 billion, bringing its total stake to $10.4 billion. At the time, WeWork's valuation was pegged at $47 billion. Now, to drum up more interest in its public offering after a frosty reception from investors, WeWork is eyeing a valuation of $15 billion to $20 billion.

The mismatch in private vs. public valuations has shooketh SoftBank to its core. Monday, the FT reported that SoftBank consiglieri are urging WeWork to shelve its IPO.

Uber bad news

The ride-hailing giant's stock price bottomed out Tuesday, posting its lowest close ever (along with Lyft). That's partially thanks to Assembly Bill 5, a proposed California law that would guarantee more employment benefits for gig workers. Last night, the state senate passed the bill.

AB5 could deal a serious blow to the ride-share business model, which is why Lyft and Uber are resisting it. Uber's already struggling: It was billions in the red last quarter, and just yesterday it laid off 435 employees.

Back to SoftBank

As I wrote in July: "With Vision Fund 2, SoftBank is playing a bit of financial jiu-jitsu." It's planning to bankroll VF2 with VF1 profits. When portfolio companies like Slack and DoorDash see a boost in valuations, SoftBank wins. But when the investor goes underwater on its WeWork and Uber bets...not so much.

Bottom line: SoftBank has made its name 1) by placing massive bets on late-stage "tech" unicorns close to going public and 2) making long-term investments in smaller players, with the hope their bold tech gambles pay off. Right now, the first part seems to be getting in the second part's way.