Daily Management Review

Control Of China Unit Sold By WeWork, Units Claims To Have Obtained $200 Million In Funding


As a part of its broader strategy to pull back from markets that are highly competitive, the United States based office sharing startup WeWork will be selling the control of the business of its Chinese division to one of its investors - private equity firm Trustbridge Partners, as the company has been hit by low occupancy rates for its properties, the company said on Thursday.
After the completion of the deal, the China business will effectively be divested by the firm and its parent company which has been plagued with cash shortages and struggled to raise funds ever since its failed attempt to go public in 2019.
A minority stake and "participating interest" in the China business will be maintained by it, WeWork said. And even as the deal was underway, the division of the company has received a funding worth $200 million from the existing investors of the company.
WeWork China's acting chief executive officer will be Michael Jiang of Trustbridge Partners. The company said.
According to reports emerging in the media in January this year, negotiations with WeWork's Chinese unit were being held by Trustbridge and Singapore state investor Temasek Holdings (Private) Ltd for increasing their stakes in WeWork and taking up majority ownership.
After much fanfare and pomp, WeWork was forced to quit its attempt of making n initial public offering in 2019 because investors were not very confident of the business model of the company and its continued losses. Investors were also weary of the corporate governance at the company. After pressure from investors, that included Japan’s investment conglomerate Softbank, co-founder and former chief executive officer of the company, Adam Neumann, was forced to resign.
Later on the SoftBank assumed control of the company. Since that episode, WeWork has undergone significant management changes. But the company is still entrenched in a lawsuit for a more than $3 billion tender offer to existing shareholders.
WeWork had almost halved its cash-burn rate from the end of last year, the New York-based startup had said last month. The company had also announced that it had got a $1.1 billion commitment in new financing from Japan's SoftBank Group Corp.
At the same time, SoftBank has also steadily divested assets to raise money after a spending spree late last decade. This month, it said it would sell chip designer Arm Ltd, purchased in 2016, to semiconductor giant Nvidia Corp for $40 billion.