Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Softbank shares have returned to the pre-Coupang levels of early February, driven by increasing concerns about the value of the Vision Fund portfolio that remains private.  Number one on the list is the potential for second-order effects from the Greensill bankruptcy which not only cost Vision Fund $1.5bn in lost equity but also includes a further $1.2bn in debt exposure and a potential cash squeeze for other Vision Fund companies that were also clients.

Softbank shares have returned to the pre-Coupang levels of early February, driven by increasing concerns about the value of the Vision Fund portfolio that remains private.  Number one on the list is the potential for second-order effects from the Greensill bankruptcy which not only cost Vision Fund $1.5bn in lost equity but also includes a further $1.2bn in debt exposure and a potential cash squeeze for other Vision Fund companies that were also clients.

Softbank Group - Concerns on the Value of Private Vision Fund Assets Re-Surface

Coupang’s monster IPO is very likely to be the highlight of Vision Fund 1 and provides a solid counterpoint to the WeWork debacle early in the IPO cycle but there remains a significant number of portfolio companies still to come. At Q3 results, Softbank talked about an ongoing parade of companies coming to market with 10-15 annual events but there is a push to get companies to list whilst markets are still receptive and FY21 could see up to 20 companies hit public markets.That is positive for Softbank shares which tend to rise in anticipation of surfaced value, again assuming the IPO market remains open. It also serves to highlight the main risk for Softbank shares as a sustained tech sell-off would lower the value of the Vision Fund portfolio, increase concerns about Northstar and lower expectations for the current crop of IPO hopefuls.<h2>Highlights</h2>Softbank Vision Fund could see up to 20 companies hitting public markets 2021 should favorable conditions continue. Vision Fund says it is encouraging companies to go public whilst conditions are still receptive and Q4 (Mar) can already boast of two listings, a SPAC merger and two more listings in process. Leading candidates to go public include Didi Chuxing and GrabCoupang upside alone doubles total returns and will boost Vision Fund to its best quarter ever.  As of mid-March, Vision Fund’s public portfolio is up $27bn versus $13bn in Q2, $8bn in Q2 and $2bn in Q1. On the aggregate, it more than doubles the Vision Fund total return There may upside in the private portfolio too as Cruise raised funds in January at a 58% premium. It is usually a mug’s game trying to figure out where private valuations will end up but the Cruise stake is large enough to outweigh a lot of smaller changes for other portfolio companies. Cruise raised $2bn in January at a $30bn valuation, a 58% premium to where Softbank invested and a possible $1.3bn unrealized gain ($2.25bn &gt; $3.55bn)Portfolio company View went public through a SPAC merger but at an apparent loss for Vision Fund.  Smart glass maker View’s SPAC merger closed 9 March, the day before the Coupang IPO but it appears Softbank’s original $1.1bn investment is worth barely half that. That is a fraction of the Coupang upside but is a reminder that valuations can go both ways. Other problem investments include Greensill, Katerra, Oyo and OakNorth

Coupang’s monster IPO is very likely to be the highlight of Vision Fund 1 and provides a solid counterpoint to the WeWork debacle early in the IPO cycle but there remains a significant number of portfolio companies still to come. At Q3 results, Softbank talked about an ongoing parade of companies coming to market with 10-15 annual events but there is a push to get companies to list whilst markets are still receptive and FY21 could see up to 20 companies hit public markets.That is positive for Softbank shares which tend to rise in anticipation of surfaced value, again assuming the IPO market remains open. It also serves to highlight the main risk for Softbank shares as a sustained tech sell-off would lower the value of the Vision Fund portfolio, increase concerns about Northstar and lower expectations for the current crop of IPO hopefuls.HighlightsSoftbank Vision Fund could see up to 20 companies hitting public markets 2021 should favorable conditions continue. Vision Fund says it is encouraging companies to go public whilst conditions are still receptive and Q4 (Mar) can already boast of two listings, a SPAC merger and two more listings in process. Leading candidates to go public include Didi Chuxing and GrabCoupang upside alone doubles total returns and will boost Vision Fund to its best quarter ever.  As of mid-March, Vision Fund’s public portfolio is up $27bn versus $13bn in Q2, $8bn in Q2 and $2bn in Q1. On the aggregate, it more than doubles the Vision Fund total return There may upside in the private portfolio too as Cruise raised funds in January at a 58% premium. It is usually a mug’s game trying to figure out where private valuations will end up but the Cruise stake is large enough to outweigh a lot of smaller changes for other portfolio companies. Cruise raised $2bn in January at a $30bn valuation, a 58% premium to where Softbank invested and a possible $1.3bn unrealized gain ($2.25bn &gt; $3.55bn)Portfolio company View went public through a SPAC merger but at an apparent loss for Vision Fund.  Smart glass maker View’s SPAC merger closed 9 March, the day before the Coupang IPO but it appears Softbank’s original $1.1bn investment is worth barely half that. That is a fraction of the Coupang upside but is a reminder that valuations can go both ways. Other problem investments include Greensill, Katerra, Oyo and OakNorth

Softbank Group - Vision Fund’s Race to Liquidity

Private Markets, Angel and Secondary Investing, Sacra

Sacra

Private Markets, Angel and Secondary Investing

Bringing transparency to private markets so investors, founders, and employees can build on conviction. Sacra delivers deeply researched insights on the private companies shaping tomorrow's markets. By surfacing the data, context, and operator perspective that are missing from private markets today, we help secondary buyers and sellers price equity accurately and unlock liquidity for the people building these businesses.

Private Capital Markets

<ul><li>WeWork is inarguably one of the most controversial companies in the world.</li><li>In January 2019, WeWork was valued at $47B, making it the second-largest private company at the time, 15x the price of its closest competitor.</li><li>Our DCF model gives WeWork a valuation of $3.5B.</li></ul>

WeWork is inarguably one of the most controversial companies in the world.In January 2019, WeWork was valued at $47B, making it the second-largest private company at the time, 15x the price of its closest competitor.Our DCF model gives WeWork a valuation of $3.5B.

WeWork: How The $3.5B Flex Space Giant Is Engineering A Comeback

<ul><li>Using our estimated 2021 revenue per member, applying 20% contribution margin and 21% tax rate, the return on capital of a site operating at 90% occupancy is 22% and increases to 27% if occupancy and margin improve.</li><li>To sense check on how much contribution margin can benefit from terminating lower quality sites, here is our illustrative calculation.</li><li>Scenario analysis shows that the business model is highly sensitive to the occupancy rate, a 5% drop in occupancy rate equals a $3B loss of equity value.</li></ul>

Using our estimated 2021 revenue per member, applying 20% contribution margin and 21% tax rate, the return on capital of a site operating at 90% occupancy is 22% and increases to 27% if occupancy and margin improve.To sense check on how much contribution margin can benefit from terminating lower quality sites, here is our illustrative calculation.Scenario analysis shows that the business model is highly sensitive to the occupancy rate, a 5% drop in occupancy rate equals a $3B loss of equity value.

WeWork Scenario Analysis, Risks, And Funding History

<ul><li>Click here for access to our WeWork valuation, revenue model, and full dataset.</li></ul>

Click here for access to our WeWork valuation, revenue model, and full dataset.

United States

WeWork Inc. provides co-working spaces for individuals and entrepreneurs. The Company offers private offices, office suites, headquarters, and custom build out options to fit a variety of office needs, as well as desk spaces and conference rooms. WeWork serves customers worldwide.

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WeWork (WEWKQ US)

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