By Eliot Brown 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 14, 2018).

WeWork Cos. said Tuesday that its largest investor, Japanese conglomerate SoftBank Group Corp., has committed an additional $3 billion to the shared-office company, valuing it at about $45 billion

If completed, the deal would make New York-based WeWork -- which was last valued in a 2017 fundraising at $20 billion -- the second-most valuable U.S. startup behind Uber Technologies Inc., and ahead of Airbnb Inc., according to Dow Jones VentureSource.

Michael Gross, WeWork's vice chairman, said the decision to take on additional money reflects the "confidence and conviction we have in the size of the market opportunity."

The Wall Street Journal had reported discussions about a far larger investment in which SoftBank would spend $15 billion to $20 billion to buy a majority of WeWork. It is unclear exactly how the latest cash commitment relates to the larger deal, which continues to be under discussion, according to people familiar with the matter.

SoftBank last year committed to invest $4.4 billion in the eight-year-old company through its $92 billion Vision Fund, backed largely by Saudi Arabia, giving the Japanese company a nearly 20% stake. That marked the second-largest fundraising round by a U.S. venture capital-backed private company, behind a $5.6 billion investment round for Uber, according to PitchBook. The latest SoftBank-WeWork deal would be the third-largest round.

WeWork said SoftBank's commitment was in the form of a warrant in which SoftBank would buy the additional stake in the first half of 2019.

The commitment came from SoftBank's balance sheet, not the Vision Fund, said Artie Minson, WeWork's president and chief financial officer. The conglomerate previously transferred a stake in WeWork from its balance sheet to the Vision Fund, which is backed with $45 billion from Saudi Arabia, and could transfer more in the future, people familiar with the matter have said. A SoftBank spokesman declined to comment.

Asked about calls for companies to reject Saudi money amid the controversy over the murder of journalist Jamal Khashoggi, Mr. Minson said the question was "irrelevant," because the deal was struck with SoftBank at the corporate level.

The deal shows WeWork's unending thirst for capital, as the company has plowed billions into a rapid expansion.

While many startups ease the pace of fundraising as they age and strive for profits, WeWork's core business model -- renovating office space that it subleases short-term to startups and divisions of large companies -- is a cash-heavy exercise. Since the company was founded in 2010, it has taken in more than $6.5 billion in cash from investors and banks. Spending has been far faster: It had $2.8 billion in cash as of last month.

WeWork also said Tuesday that its revenue in the first nine months of the year grew to $1.2 billion, double the $603 million generated in the same period last year. As of September, its annualized revenue had reached $2 billion and its occupancy was 84%.

With its number of rented desks more than doubling from a year earlier to 297,000, the results highlight how demand for its space has risen as the company has rapidly boosted supply. Still, the expansion comes at a cost, and losses are piling up even faster than revenue -- a trend that has stirred concerns among industry players.

The company's adjusted earnings, which exclude costs such as depreciation, interest payments and adjustments for rent incentives, registered at a loss of $415 million in the first nine months of the year, compared with a year-earlier loss of $108 million. The company released select financial measures but not its net loss, unlike its prior report. A WeWork spokesman declined to comment on the change.

WeWork said the increased losses were expected, and come as the company is planning to add a record 100,000 new desks in the fourth quarter. It called the extra spending "a function of our view on profitable growth."

One of the biggest areas of increased spending was in sales and marketing, which totaled $244 million in the first nine months. That was nearly triple year-earlier spending of $84 million -- which itself was triple the amount in the same period in 2016.

WeWork said the rise stems in part from its signing longer tenant contracts, which entail higher upfront sales costs. The company has also offered considerable discounts to some new tenants.

The company also showed strength in its push to lease more desks to large businesses. In total, 29% of the company's desks are leased to large businesses, up from 20% a year earlier.

Write to Eliot Brown at eliot.brown@wsj.com

(END) Dow Jones Newswires

November 14, 2018 02:47 ET (07:47 GMT)