SoftBank attempts to take control of WeWork
SoftBank prepares to invest further in WeWork, in exchange for de-facto control of the board
In an effort to limit further damage WeWork’s largest external investor, SoftBank, is preparing a financial package that will give it control over the struggling commercial real estate start-up and its parent company, We Company.
SoftBank is a Japanese conglomerate that works in an increasingly close partnership with Saudi Arabia. It is the largest investor in SoftBank’s $100bn Vision Fund, which invests in technology start-ups, including WeWork.
SoftBank already owns about a third of WeWork and the proposed deal could increase its stake to 50 per cent.
WeWork was set for an initial public offering (IPO) at the end of this year, with an initial valuation in the region of $47bn. However, investor interest was not forthcoming. Many were concerned with the fact that the company operates at a significant loss with an unclear path to future profit. They were also concerned about the actions of its founder, Adam Neumann.
Neumann’s corporate governance style ruffled feathers and the deal struck for the public listing would have initially given him more control on the company’s board.
WeWork cut its valuation initially to $20bn and then to $12bn. Eventually SoftBank stepped in and urged that the IPO be shelved, Neumann resigned as CEO following further pressure.
SoftBank is preparing to offer a further investment of billions of dollars in debt and equity in exchange for increased voting power of the board of WeWork’s parent We Company.
Alternatively it is contemplating raising debt with the assistance of JPMorgan Chase & Co.
SoftBank has itself experienced turmoil this year with doubts that its investments in disruptive technology start-ups will pay off.