The deal brewing between SoftBank and WeWork tells us more than any move prior about the way they view the finance and real estate industries they are challenging. SoftBank’s Vision Fund sees the opportunity to spend more money than it ever has before and in a way that is uniquely SoftBank — a quick-strike deal that would certainly invite some snickers from rivals but would allow them to obtain what every one of those Silicon Valley investors lusts for: Big ownership in the next big thing. WeWork’s leadership apparently sees enough value in SoftBank’s backing that it could give up what no CEO ever wants to surrender — control — in exchange for a massive valuation that would solidify the real-estate giant as a legitimate tech company that can fetch a tech-like valuation when it goes public. Sources familiar with the deal disagree as to whether a control investment still remains on the table as of today. It’s very possible that the talks for SoftBank Vision Fund to invest up to $20 billion into WeWork will fail, Recode was told. Here are some of the hazards that could trip up either side over the next few weeks. Backing from foreign governments has always loomed as a major liability for venture capital investors. The SoftBank-Saudi ties are not new. But the Khashoggi revelations make it particularly bad timing for a deal, as WeWork could face reputational risk for taking money from a government that’s embroiled in such a high-profile human rights case. “If all that’s alleged is true, WeWork will be in bed with a regime that has expressed brazen disregard for virtually any norm of international politics,” said Chris Meserole, a foreign policy fellow at The Brookings Institution. “They should tread carefully before accepting a majority stake from a fund that’s in effect a Saudi investment vehicle.” Financial terms of the deal still being negotiated have been described as tense. But if SoftBank were to sink as much as $20 billion more into the company at a valuation of around $40 billion, then there has to be a belief that public market investors could envision WeWork as worth a multiple of that. Is WeWork a $100 billion company? As much of a quarter of the Vision Fund’s assets would be tied to that fate. Would SoftBank — which is planning to raise a second investment vehicle that is at least as big as its current one — repeat this move and start trying to gain control investments in order to spend more money more quickly? That’s likely to scare off the elite founders who are naturally skittish about yielding too much control to any investors, never mind one single one. But there is a limited number of private companies around the world that can accept SoftBank’s big checks, and so control investments are a natural area for the Vision Fund to dabble in. Would SoftBank Corp. have any desire to buy the whole thing? The company is transitioning from the world of telecom to the world of high finance, so you’d think not. And a more fundamental question: Will WeWork fare better with SoftBank at the helm or with its founders at the helm? This article originally appeared on Recode.net.
WeWork could face reputational risk from the new , massive investment from the Vision Fund currently being discussed . The Saudi Government , which has a 45 % stake in the Vision Fund , is in the spotlight over allegations surround its connection to the murder of Jamal Khashoggi , a US - based journalist . The news also raises question over the Vision Fund ’s strategy . Plans to launch a second , sizeable investment vehicle , revealed last week , highlights the fact that there are n’t that many private companies big enough to absorb the amount of capital the venture capital fund[s ] is trying to raise .