- Goldman Sachs had sold some of its stake in WeWork even when the investment bank set up the cooperating company for a very lucrative IPO mandate.
- The bank redeemed shares in two previous fundraising rounds when WeWork mega investor SoftBank gave employees and former investors a chance to sell their stake, according to a person with knowledge of Goldman's actions.
- The bank assigned a "much more modest valuation to the company than the $ 47 billion set earlier this year, or $ 61 to $ 96 billion that the company's investment bankers told the company's top executives it could come in a stock exchange listing.
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Goldman Sachs, one of the best underwriters on WeWork's aborted first offer last month, sold its stake in the coworking company ahead of the planned IPO, according to a person with knowledge To the Wall Street bank's actions.
That means when Goldman touted its services to WeWork, asking investors to buy new mint public shares in a company that was last valued at $ 47 billion, the bank was already reducing its own exposure.
The investment bankers are in a different division than those who make investments for Goldman, and the WeWork investment was made by the commercial banking division Regulations require so-called Chinese walls between such business units to prevent sharing of privileged information.
The bank redeemed shares in two previous rounds of raises when WeWork mega-investor SoftBank gave employees and early investors a chance to bid on shares, the person said. Selling a stake can be seen as sound risk management or a sign the company has grown pessimistic for a company's future prospects.
Goldman also assigned a "much more modest" value than WeWork's $ 47 billion valuation, the person said Tuesday.
Meanwhile, the company's investment bankers wanted a mandate for the IPO by suggesting WeWork executives could fetch a valuation in the public market between $ 61
Banks like Goldman usually look for ways to work with hot tech startups before long-awaited IPOs and then highlight those conditions and obligations as they line up for the public. It may take the form of small ownership interests or lending obligations.
A Goldman Sachs spokesman declined to comment.
Goldman reported third-quarter earnings on Tuesday, announcing a $ 80 million write-down on the value of the WeWork share. It represented more than 50% reduction in mid-term valuation. At the end of September, the bank estimated the investment to be worth $ 70 million, still above where it bought it.
The write-down was much smaller than what Betsy Graseck, a Morgan Stanley analyst, predicted last week. Graseck said she expected Goldman to mark its stake of $ 264 million in the third quarter based on an estimate of the size of the bank's stake, which it attached to 1.4%.
The gap is most likely because Graseck did not know, or could not have known, that Goldman had shrunk its stake, the person said.
Read more : Goldman Sachs says it absorbed a $ 80 million impairment after WeWorks IPO disaster
It is unclear what valuation Goldman Sachs awarded WeWork for value of their minority stake, but managers have previously said they rely on observable events, such as fundraising rounds and sales. The company also imposes a liquidity discount to compensate for a share that cannot be easily sold.
The last time WeWork collected money was in January, when SoftBank bought shares valued at $ 47 billion. The company also bought shares from employees and investors at a valuation of $ 23 billion, giving it a mixed valuation of $ 36 billion, according to The Wall Street Journal, citing anonymous sources.
Goldman bought his investment in WeWork during a series of fundraising rounds that went back to at least 2014, according to FT.
WeWork selected Goldman and JPMorgan as its leading underwriters in August.
WeWork dropped its IPO last month and withdrew its prospectus after investors raised questions about the collaborative firm's business model and conflict of interest with founder and former CEO Adam Neumann.
The company is now in talks with JPMorgan, which is also an investor and lender to Neumann and the company, to raise as much as $ 5 billion and cover an expected cash crisis later this year. Goldman is not involved in these rescue funding talks.