WeWork eye bailout that gives SoftBank control
WeWork is considering a bailout that will hand over control of the co-worker giant to SoftBank Group Corp., one of two current options to rescue the once high-flying start-up, according to a source familiar with the matter.
The Japanese investment giant owned by billionaire Masayoshi Son is confident that with the right financial controls in place, it can transform cash-strapped WeWork, the individual said, asking not to be named speaking about internal deliberations. Nevertheless, the board and backers of WeWork are also considering another possibility: JPMorgan Chase & Co. is leading talks on a debt package of $5 billion, Bloomberg stated.
A rescue plan would alleviate a cash crunch that, as early as next month, may leave the office-sharing business short of funds. The start-up of office sharing was heading towards one of the most hotly anticipated IPOs of the year before prospective investors balked at specific financial measures and faulty governance, transforming the American giant into a cautionary tale of exuberance on the private market and costing his job to the top executive of the group.
The fast-growing, money-losing startup had counted on a stock listing — and on a successful IPO $6 billion loan contingent— to meet its cash needs.
For the first time, the Wall Street Journal confirmed that SoftBank could negotiate a deal to acquire WeWork influence.
Representatives were not immediately available to comment on Monday, a national holiday, for the Japanese company.
SoftBank is already the largest shareholder in WeWork, but the proposed deal will boost its leverage over the company, the individual said, refusing to elaborate on when a decision could be made on the competing offers. The Japanese company is in advanced talks to buy more shares at a significantly lower cost than WeWork’s $47 billion invested in January, said two people familiar with those talks last week.
The New York Times reported that board members would meet Monday to decide which bailout to choose from.
If the board opts for the SoftBank deal, at a time when it is struggling to convince the market of its long-term investment vision, the Japanese company will take on a troubled business. It is also busy wooing potential investors in its record-breaking Vision Fund for a successor.
After repositioning his business from a telecommunications operator to an investment conglomerate, Son is going through a rocky stretch, with stakes in scores of startups around the world. He built up a personal fortune of about $14 billion with spectacularly successful bets on companies like Alibaba Group Holding Ltd. But SoftBank’s shares are down about 30% from their peak this year as investors, unnerved by the disappointing debut of WeWork and Uber Technologies Inc., grow skittish about start-up valuations. In an interview with the business magazine of Nikkei, Son said he was disappointed with how far his results have fallen short of his expectations to date.
WeWork and Uber may be losing money now, but in 10 years, Son said in that interview, they will be significantly profitable. Yet late last month he had a different message at a private conference for portfolio companies: get profitable soon.
Son also stressed the importance of good governance at the meeting held at the five-star Langham resort in Pasadena, California. SoftBank led the ouster of the notorious co-founder of WeWork, Adam Neumann, just days later.
“WeWork has retained a major financial institution on Wall Street to arrange financing,” a U.S. company representative said in a statement on Sunday. “Approximately 60 sources of funding have signed confidentiality agreements and are consulting with the management of the company and its bankers over the past week and this coming week.”