Softbank confirms multi-billion-dollar lifeline deal with WeWork
After the deal is finalized, Softbank’s stake in the tumultuous property startup would raise to about 80%. The Japanese investment giant already owned about a third of WeWork prior to the deal.
The so-called ‘lifeline’ deal is expected to put an end to the company’s recent history of hectic performance, including last month’s indefinitely delayed IPO and subsequent abdication of Co-founder Adam Neumann from the position of chief executive amid rising concern regarding his leadership. Neumann’s complicated financial ties to the company also raised eyebrows with investors and played a significant role in him stepping down.
Mr. Neumann is expected to leave WeWork’s board of directors after the deal goes through, but will still have ties to the company under an “observer” status. Marcelo Claure will take over as executive chairman of the WeWork board. Neumann’s departure, however, will result in a significant payout to the former executive. As a direct result of the Softbank dale and the successive sale of his company shares as well as through various other fees, Neumann is expected to receive up to $1.7 billion, according to an estimate by the Wall Street Journal.
The rescue package from Softbank includes the acceleration of an already existing $1.5 billion funding commitment, which is will add on to new financing as well as a tender for existing shareholders. "Softbank has decided to double down on the company by providing a significant capital infusion and operational support," Masayoshi Son, Softbank’s chairman, said in a statement. "SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work," he continued.
WeWork rents out shared office space and was among the first trendsetters to bring co-working to the mainstream. After growing from a single office in New York to over 500 locations around the gobe, the company, at one point, was valued at $50 billion. However it is important to note that it also lost $900 million during the first six months of this year. 40-year-old billionaire Adam Neumann did everything he could to build the company in his own image, but the co-founder’s brazen charisma, which one attracted investors, is now seen as a liability.