SoftBank extends lifeline, will take control of WeWork

WeWork CEO cashes out $700M, raising eyebrows across the tech industry

Despite once being valued at a whopping $47 billion, WeWork’s struggling corporate real estate business is reportedly just weeks away from running out of money. Now, SoftBank is stepping in to keep the company afloat with an investment of between $4 to $5 billion in new funding and existing shares, according to CNBC.

The move will put SoftBank in control of approximately 70 percent of WeWork. This will make it the majority owner by a wide margin. Sources believe that SoftBank’s CEO Marcelo Claure will manage the embattled company as it seeks to quickly stop the bleeding.

Diamonds to Dust

For WeWork, 2019 has been a tumultuous year of ups and downs. Coming into the year, the company’s highly anticipated IPO had investors salivating. In September, following massive losses of $900 million across the first half of the year, WeWork announced that it will no longer be taking the firm public in 2019 and is now targeting an IPO launch in 2020.

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September also saw the departure of the startup’s founding CEO Adam Neumann. His stake in WeWork will reportedly drop into the low double digits following the move from SoftBank.

Interestingly enough, SoftBank has been a long-time investor in the company and up until now has previously supported it with $10.65 billion. Now, it will look to deepen that position. According to CNBC, “SoftBank will be making up to a $3 billion tender offer along with a $1.5 billion acceleration of equity it has already committed and $5 billion in syndicated debt, according to two sources familiar with the matter.”

That move is likely to take place as early as Tuesday morning. It will almost certainly happen by the end of the week. SoftBank hopes that the lifeline allows the space-sharing startup to rapidly become cash flow positive. In the meantime, WeWork’s valuation will now sit somewhere around $7.5 billion.

Leadership Shakeup

Neumann’s departure last month isn’t the first leadership change that WeWork has seen in 2019 and, thanks to the fact that SoftBank is now taking control of the company, it probably won’t be the last.

Previously, the startup’s communications chief, Jimmy Asci, stepped down. The same is true of Robin Daniels, its chief marketing officer. It appears that the wary executives didn’t like the company’s direction and wanted to get out while they could.

Meanwhile, WeWork is in the process of slashing jobs at a frenetic rate. Just last week, reports revealed that the startup was poised to cut as many as 2,000 employees from its workforce—about 13 percent of its total. It is unclear how SoftBank’s bailout will affect those plans moving forward.

In a time where most investors are running away from WeWork, SoftBank’s move to step in and save it from the brink of extinction is an interesting one. There will be plenty of developments to monitor moving forward, so stay tuned to The Burn-In for the latest details.