Daily Management Review

SoftBank Plans Rescue Package For Wework Against Control Of The Firm: Reuters


SoftBank Plans Rescue Package For Wework Against Control Of The Firm: Reuters
Japan’s SoftBank Group Corp. is planning to gain control over the shared office space company WeWork Companies Inc by giving the cash strapped company a financing package that it has already prepared, said a report published by the news agency Reuters quoting sources with knowledge of the matter.
SoftBank already owns about one third of WeWork from previous investments that it had already made and sources said that the latest financial package will significantly increase the stake of Japanese investment firm in the US firm. Analysts also said that a further investment by Softbank would further reduce the influence of co-founder Adam Neumann in the company.
Reuters had earlier reported that negotiations for a $1 billion investment were being held between SoftBank and WeWork with the aim of helping the office space sharing company to implement a major restructuring process.
Sources have said earlier that the speed at which WeWork is burning up cash and the amount of cash on hand that it has, it runs the risk of running out of cash by the end of the December this year if there is no fresh infusion of cash in the company.
Following the debacle and cancellation of a proposed initial public offering of WeWork that was slated for September 30 because of lack lack of interest among investors and the very low valuation that some analysts and investors accorded to the company, reports said that the company is coordinating with JPMorgan Chase & Co to secure a $3 billion debt deal.
“WeWork has retained a major Wall Street financial institution to arrange a financing,” a WeWork spokeswoman said. “Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”
According to WeWork’s prospectus and regulatory filing before its planned IPO, the company had made a loss of $1.9 billion in 2018 and expended about $2.36 billion in cash in the first half of the current year.
WeWork’s credit ratings have been downgraded deeper into junk territory by global credit rating agencies Standard & Poor’s and Fitch Ratings in recent weeks. On the other the company’s junk bond is trading at a record low.
Company insiders Artie Minson and Sebastian Gunningham were appointed by the company to replace co-founder Neumann as joint CEOs. The new CEO duo have been pushing the idea of the company to discarding its peripheral businesses and focus on its core business of renting out of office space to freelancers and enterprises. The fringe activities had been that started under the reign of Neumann as the CEO which included businesses such as a school, apartment buildings and various other smaller businesses.