On Thursday, the Japanese conglomerate, SoftBank, announced it is not going to follow through with a huge portion of its WeWork rescue effort. Late last year, the tech company pledged to buy $3 billion worth of shares to help bring the coworking unicorn back from the brink of bankruptcy. The offer included a near-billion payout for disgraced former CEO, Adam Neumann.
SoftBank claims that several conditions outlined in October 2019 have not been met. The company evidently failed to get antitrust approvals by April 1 and is facing “multiple, new, and significant pending criminal and civil investigations.” The special committee of WeWork’s board dealing with SoftBank disagrees and is exploring several response options.
The overall decision to pull back from WeWork signals a change of heart for Softbank CEO Masayoshi Son. After the announcement, his firm’s shares ballooned 2.5 percent in Tokyo. However, Son’s bigger tech ambitions are facing many roadblocks.
WeWork Can’t Get a Win
WeWork was the subject of many bad headlines last year. The company tried to execute an IPO in August but had to walk away after reports surfaced about unhealthy workplace dynamics and massive losses. WeWork lost almost $1 billion in the first half of 2019 and had to layoff 2,400 people in November.
The coworking giant still has not regained its footing, and COVID-19 isn’t helping. Just last month, Son projected WeWork would be back on top and generating positive cash flows within a few years. Today, the pandemic is wreaking havoc on the entire sector.
Tenants are staying home and asking landlords if they can delay rent payments. Travel restrictions and urban shutdowns are putting WeWork in a position to foot long-term lease payments when businesses cancel their contracts. With SoftBank out of the picture, the company loses out on major debt financing to the tune of $1.1 billion.
Neumann’s Fall from Grace
Since his fallout with the company, former CEO Neumann has been traveling the world with his family, avoiding the spotlight or speculation about what he would do next. At one point, Neumann’s net worth was around $14 billion.
Now that he won’t be receiving a windfall from SoftBank, he has lost his billionaire status, according to Bloomberg. Neumann will miss out on $975 million total. His fortune has plummeted 97 percent to $450 million in under 12 months. Yet, he isn’t the only one in a bad position from WeWork’s troubles and COVID-19.
Big Tech Giant Wavering
SoftBank and its $100 billion Vision Fund are feeling the pandemic heat as well. CEO Son has poured billions of dollars into tech startups and early-stage companies, many of which are suffering immensely.
Son surprised the public last week when he announced a fire sale for more than $41 billion worth of assets. With the capital, he plans to buy back shares and decrease Softbank’s debt load.
The decision comes on the heels of another Softbank failure. The group did not meet its financing goal for Vision Fund 2, which is designed to invest more in tech companies like Uber and DoorDash. As with many industries and businesses, we’ll have to wait and see who is still around when the coronavirus dust settles.