Key investors in SoftBank Group Corp.'s giant tech fund have balked at a planned $16 billion investment in co-working startup WeWork Cos., leaving SoftBank Chief Executive Masayoshi Son to find an alternative as his ambitions hit up against the limits of his financial firepower. Government-backed funds in Saudi Arabia and Abu Dhabi, according to people familiar with the matter, have told SoftBank executives they have concerns about SoftBank's negotiations to buy a majority of money-losing WeWork, whose industrial-chic workspaces workspaces and short-term leases have made it one of the world's hottest startups.


Saudi Arabia's Public Investment Fund, or PIF, and Abu Dhabi's Mubadala Investment Co. contributed the bulk of the nearly $100 billion raised by the SoftBank Vision Fund. Their size gives them an effective veto over certain investments and a loud voice in validating Mr. Son's moves.


Some of the people said that PIF and Mubadala have questioned the wisdom of doubling down on WeWork, and have cast doubt on its rich valuation. The company is on track to lose around $2 billion this year, and the funds have expressed concern that WeWork's model could leave it exposed if the economy turns down, some of the people said.


Mr. Son still hopes the sovereign funds will let the Vision Fund pay for some of the deal, one of the people said. SoftBank is considering other ways to fund the deal, including using its own cash, raising debt and bringing in outside investors, the person said. It may use the proceeds from the initial public offering of its Japanese telecom business. SoftBank already carries heavy debt: nearly ¥18 trillion, or roughly $158 billion, as of Sept. 30

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