Goldman Sachs quietly unloaded some of its WeWork shares while its investment bankers were pitching the company a $60+ billion IPO

• Goldman Sachs had sold some of its stake in WeWork even as the investment bank was pitching the coworking company for a highly lucrative IPO mandate.
• The bank unloaded shares at two earlier fundraising rounds when WeWork mega-investor SoftBank gave employees and earlier 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 value set earlier this year, or the $61 billion to $96 billion range the firm's investment bankers told the company's top execs it might get in an IPO.
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Goldman Sachs, one of the top underwriters on WeWork's aborted initial public offering last month, sold down its stake in the coworking company in the the run-up to its planned IPO, according to a person with knowledge of the Wall Street bank's actions.

That means that as Goldman was touting its services to WeWork and asking investors to buy newly minted public shares in a company most recently valued at $47 billion, the bank was already reducing its own exposure.

The bank unloaded shares at two earlier fundraising rounds when WeWork mega-investor SoftBank gave employees and early investors a chance to tender shares, the person said. Selling a stake can be seen as prudent risk management or as a sign the firm has grown pessimistic about a company's prospects.

Goldman also assigned a "much more modest" value to the company than WeWork's $47 billion valuation, the person said on Tuesday.

The firm's investment bankers, meanwhile, were angling for a mandate on the IPO by suggesting to WeWork executives that it could fetch a public-market valuation of between $61 billion and $96 billion, the Financial Times has reported. Those values were based on WeWork's revenue projections, according to a second person who has knowledge of the pitch.

Banks like Goldman typically look for ways to work with hot tech startups prior to highly anticipated IPOs and then highlight those relationships and commitments when they pitch for the public float. That can take the form of small ownership stakes or lending commitments.

A Goldman Sachs spokesman declined to comment.

Goldman reported third quarter earnings Tuesday, announcing an $80 million write-down on the value of its WeWork stake. That represented a more than 50% cut to its midyear valuation. At the end of September, the bank estimated its investment to be worth $70 million, still above where it acquired 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 down its stake by $264 million in the third quarter based on an estimate of the size of the bank's stake, which she pegged at 1.4%.

The gap is most likely because Graseck didn't know, or couldn't have known, that Goldman had shrunk its stake, the person said.

It's unclear what valuation Goldman Sachs assigned to WeWork to come up with the value of its minority stake, but executives have said in the past that they tend to rely on observable events, such as fundraising rounds, sales or other activities. The firm also overlays a liquidity discount to make up for the fact that a stake can't be easily sold.

The last time WeWork raised money was in January when SoftBank acquired shares at a $47 billion valuation. It also purchased stock from employees and investors at a $23 billion valuation, giving it a blended valuation of $36 billion, according to the Wall Street Journal, which cited anonymous sources.

Goldman acquired its investment in WeWork during a series of fundraising rounds going back to at least 2014, according to the FT.

WeWork chose Goldman, and JPMorgan, as its lead underwriters in August.

The firm's investment bankers tend to keep separate from those within the firm charged with making investments, and the WeWork investment was made by the merchant banking unit. That, along with the fact that the bankers valuation was tied to WeWork's own projections, could explain why the valuations were so different.

WeWork shelved its IPO last month and withdrew its prospectus after investors raised questions about the coworking firm's business model and conflict of interest concerns 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 crunch later this year. Goldman is not involved in those rescue financing talks.