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Fidelity has slashed the valuation of WeWork shares in its mutual funds by nearly 70% in less than a year — and other asset managers are even more negative

Sandeep Mathrani
  • Mutual funds holding stakes of WeWork have continued to slash the valuation of their holdings in the struggling coworking company, filings show.
  • Managers like Fidelity, Principal Global Investors, and Hartford Funds have cut their valuations by at least 60% since last fall.
  • One manager, Macquarie Investment Management, now values its stake in the company at just $3.60 a share. 
  • The coworking space has been severely impacted by the novel coronavirus pandemic, which has brought on hundreds of layoffs. 
  • The coworking firm's biggest investor, SoftBank, recently said it would take a $6.6 billion hit on its massive investment in WeWork for the year ended in March. 
  • WeWork founder and former CEO Adam Neumann is now suing SoftBank for backing out of a deal to buy nearly $1 billion of his shares. 
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Fidelity's massive Contrafund, which runs more than $111 billion, now values its stake in WeWork at roughly 70% less than it did at the end of June last year.
And the Boston-based asset management giant is one of the most optimistic mutual-fund managers when it comes to the struggling coworking firm.
WeWork's valuation, which capital markets bankers once pitched to the company's executives in the tens of billions, has crashed after it failed to go public and the company's largest investor, SoftBank, ousted founder Adam Neumann as CEO.
Now, as the novel coronavirus pandemic forces many businesses that were using WeWork offices to miss rent, the valuations put on the company's private shares by asset managers are tumbling further.
Fidelity believes the company is worth $15.99 a share as of the end of March, a sharp decrease from the $52 a share the firm said WeWork was worth at the end of June.
Macquarie Investment Management, which is invested in WeWork through its Optimum Large Cap Growth Fund, was even more pessimistic than most, valuing the firm at $17 a share at the end of September. Now, Macquarie pegs the firm's value at $3.60 a share as of the end of March.
Principal Global Investors reduced its valuation of its WeWork stake by nearly 80% since September, to $7.77 a share. Hartford now pegs the firm at $13.82 a share — down more than 60% from September.
WeWork and the asset managers mentioned declined to comment.
The coworking firm's biggest investor, SoftBank, recently said it would take a $6.6 billion hit on its massive WeWork investment for the year ended in March.
Business Insider reported last week that WeWork has started rolling out another round of global layoffs. That's on top of thousands of jobs the company had already slashed after its IPO imploded as it raced to cut costs and get rid of non-core businesses.
The latest cuts hit departments such as business operations, sales, and physical product, which includes design. IT has lost about 200 jobs. And WeWork's community team, who work in the company's more than 800 locations, will have to apply for new jobs under a reorganized team structure.
WeWork's Neumann recently brought a lawsuit against SoftBank for backing out of a deal to purchase $3 billion in stock of the company as part of a bailout after the IPO failure. The coworking firm has said it had roughly $4.4 billion in cash and cash commitments as of the end of last year.
Valuations put on private shares by mutual fund managers can vary widely based on the methodology they use to assess their stakes. As Business Insider had reported last year, the SEC has had talks with asset managers about the discrepancies.
Differences in opinion on private shares were on display recently at another venture-backed giant that's been hit hard by the pandemic. As Business Insider reported last month, Principal Global Investors and Hartford Funds have cut valuations on Airbnb, while one mutual-fund investor, Macquarie, upped its valuation of the vacation-rental giant even after the virus broke out in the US.
Airbnb on Tuesday told workers it was cutting 25% of staff— or 1,900 workers. The company had been seen as a likely candidate for a 2020 public-market debut before the coronavirus brought global travel to a near standstill.
Axel Springer, Insider Inc.'s parent company, is an investor in Airbnb.
SEE ALSO: Some large Airbnb investors have slashed their internal valuations of the company by more than 30% as the pandemic halts travel
SEE ALSO: WeWork is rolling out global layoffs over Zoom and has kicked off talks to slash jobs in the UK as the coworking giant struggles to cope with coronavirus fallout
SEE ALSO: As WeWork and flex-space rivals stumble, 18 million square feet of space in NYC is at risk. Here's what that means for the real-estate market.
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* This article was originally published here Press Release Distribution

Source - https://www.businessinsider.com/prime?module=article&area=summary

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