SoftBank Group offered close to US$10 billion to WeWork owner The We Company, its employees and its investors on Monday under a plan to keep the struggling US office-space sharing firm afloat that would lead to the exit of the startup’s co-founder and Chairman Adam Neumann, Reuters reports, citing people familiar with the matter.
WeWork could run out of cash as early as next month without new financing, after the company pulled plans in September for an initial public offering (IPO).
The IPO was abandoned as investors questioned the firm’s large losses, the sustainability of its business model and the way WeWork was being run by Neumann, who gave up his CEO title last month and now serves as board chairman.
The We Company’s board will meet on Tuesday to evaluate SoftBank’s offer against an alternative financing proposal from JPMorgan Chase, sources told Reuters.
JPMorgan faces challenges in putting together a debt package for WeWork, because it has not underwritten it and is trying to find banks and institutional investors to back it, the report said.
SoftBank is said to have offered US$5 billion in new money to WeWork in the form of debt, and is also proposing to accelerate a previous US$1.5 billion equity commitment in the form of warrants that are due in April, according to the report.
This commitment was made in January at a US$47 billion valuation, but SoftBank is now seeking to renegotiate it at a valuation of about US$8 billion, Reuters cited its sources as saying.
SoftBank is also proposing to launch a tender offer for up to US$3 billion to acquire WeWork shares from existing investors and insiders, including Neumann, according to the sources.
Based on the outcome of the tender offer, SoftBank could own between 60 percent and 80 percent of WeWork but will seek to avoid consolidating the company on its books.
SoftBank and its Vision Fund already own about a third of WeWork through previous investments totaling US$10.6 billion.
Neumann could step down from The We Company’s board as part of the deal with SoftBank and become an adviser, according to the report.
SoftBank Chief Operating Officer Marcelo Claure could succeed Neumann as chairman.
Neumann’s exit from The We Company’s board would represent a dramatic fall from grace for the entrepreneur.
While investors were willing to entertain his eccentricities since co-founding WeWork in 2010, his free-wheeling ways and party-heavy lifestyle came into focus once he failed to get the company’s IPO underway, Reuters noted.
During the attempts to woo IPO investors last month, Neumann was criticized by corporate governance experts for arrangements that went beyond the typical practice of having majority voting control through special categories of shares.
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