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SoftBank bails out Katerra. WeWork 2.0?

SoftBank’s Masayoshi Son (Credit: Bloomberg)

SoftBank Group has agreed to invest an additional $200 million to bail out Katerra, according to the Wall Street Journal. The new investment will enable the construction startup to avoid having to seek bankruptcy protection.

  • New CEO Paal Kibsgaard walked into a minefield: Before he became CEO, the company discovered financial practices that weren’t in line with generally accepted accounting principles and launched an internal investigation. The probe resulted in people getting fired.
  • Good idea, poor execution: The Japanese investment firm previously invested roughly $2 billion into the construction tech startup. As part of this deal, SoftBank-backed financial-services firm Greensill Capital agreed to cancel around $435 million in debt owed by Katerra for a 5% stake in the company, the Journal noted.
  • Worth Noting: SoftBank’s Vision Fund is raising $604 million for a SPAC (AKA blank-check companies). These publicly traded cash shells are formed with the sole purpose of taking over a yet-to-be-named operating company. SPACs have been one of the hottest asset classes of 2020, with 234 U.S. IPOs raising $81 billion this year.
  • Daily Beat will do the due diligence for you: Potential retail investors in its SPAC, SVF Investment Corp ($SVFA) must understand the history of the vehicle. The Vision Fund recorded staggering losses after writing down WeWork’s valuation to $2.9 billion, down more than 90% from its $47 billion peak. SoftBank has invested more than $10 billion in WeWork.
  • Heard on the Street: CEO Paal Kibsgaard: “Since taking over as CEO in July 2020, my team and I have been hard at work reducing costs and refocusing on our core businesses. We believe that this strategic and operational realignment, supported by SoftBank, is in the best interest of all stakeholders and will provide Katerra with the financial flexibility and resources needed to invest in areas that have the most promising growth trajectory. We appreciate SoftBank’s continued support and confidence in the company and its prospects throughout this process.” [WSJ+PressRelease]

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