WeWork was one of the biggest co-working companies globally. Though it was worth $47 billion in January 2019, IPO struggles have tanked its valuation. Just when we thought things couldn’t get any worse for WeWork, news came out last week that the struggling WeWork only had enough cash on hand to stay afloat till mid-November.
The good news finally came this week, from SoftBank. According to a report, SoftBank is in the process of bailing out WeWork with takeover, slashing its valuation between $7.5 billion to $8 billion.
New capital from Softbank
WeWork and SoftBank Group agreed to a new capital of $5 billion in new financing and issuing a tender offer for another $3 billion in buybacks for shareholders. The company also said it would accelerate an existing commitment to put $1.5 billion into the short-term real estate rental company.
SoftBank exec Marcelo Claure will be involved in the company’s management, while former CEO Adam Neumann’s stake will fall to low double digits.
The deal from SoftBank was in the lead among some directors, a person familiar with the board’s thinking said on Monday. The board was weighing the proposal with an eye toward making a decision as soon as early this week, though the process is fluid, said the person, who asked not to be identified discussing private deliberations.
JPMorgan Chase & Co. has been preparing a separate financing package to present to the WeWork board, another person said. The bank has been pitching investors on a $5 billion junk-debt offering.
“SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution. It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced; … Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support. We remain committed to WeWork, its employees, its member customers and landlords.”
– Masayoshi Son, chairman and chief executive of SoftBank Group Corp
As part of SoftBank’s plan, it would appoint one of its executives, Marcelo Claure, as chairman of WeWork’s board, one person familiar with the proposal said. Claure would replace Adam Neumann, the current chairman and co-founder who was ousted as CEO last month. SoftBank’s financing would also eliminate special stock rights for founders that give them outsized voting power. Neumann would be left with less than 10% of votes.
Keeping the lights on
The startup had previously amassed more than $10 billion in commitments from SoftBank. But public investors spurned the company, which lost $900 million in the first half of this year. As its estimated valuation cratered, WeWork pulled its IPO paperwork, a deal could give WeWork a reprieve as it scrambles to cut costs. The company has said it is looking to offload several of the companies it recently acquired, plans to shutter the elementary school located in its corporate headquarters in New York and even put its $60 million corporate jet up for sale.