SoftBank to take charge of WeWork

SoftBank decided to acquire WeWork at an $8 billion valuation.

WeWork, an American commercial real estate company that provides shared workspaces for technology startups, founded in 2010. Eventually, after the ouster of its Co-founder Adam Neumann, the company lost its valuation from heft $47 billion to $7.5 billion, as reported by CNBC. WeWork has over 800 locations worldwide.

WeWork has a scrambling period to keep the company afloat, which makes them to lean on SoftBank’s Vision Fund. 

Softbank Group, based in Japan, is one of the largest investment companies in the world which owns stakes in one of the major tech businesses including AliBaba, Sprint, Uber, Stack, Clash of Clans and many others.

READ: WeWork to lay-off 2,000 employees; amid IPO crisis

Mayasochi Son from SoftBank assigned the duty to its Chief Operating Officer to negotiate WeWork’s team to rescue them for the month of November. Sources said that SoftBank is all set to take control of the embattled workspace company. They plan to spend somewhere between $4 billion and $5 billion in exchange for new and existing shares. It is SoftBank itself acquiring the control, not their start-up focused Vision Fund. After this acquisition, SoftBank would then have as much as 70% or more control of WeWork.

READ: WeWork founder will get nearly $1.7 billion to let SoftBank take over his company (The Verge)

Adam Neumann will lose his voting power in this deal, however, he will still be able to get a huge chunk of $1.7 billion in the process of multi-billion deal with SoftBank.

Since Neumann’s departure last month, WeWork’s been sharpened on raising new capital. The company has been in conversations with J.P. Morgan to discuss debt financing. The adverse effects from the controversies and subsequent plummet in value have led to a tense relationship between former Neumann and SoftBank’s Son, who has long-time invested billions into the start-up.

WeWork earlier this year was in consultations to borrow $6 billion from banks, which were likely to raise at least $3 billion in a public offering. But after the company released its IPO filing in mid-August, investors, analysts, and the media pointed out the problems with its business model and conflicts of interest

In addition to those financial shake-ups, WeWork has lost its communications chief, Jimmy Asci, its chief marketing officer, Robin Daniels and several others. Their large workforce has been sacked. The company was reportedly set to withdraw at least 2,000 people.

Do you think this decision of SoftBank can backfire?

Featured image: David ‘Dee’ Delgado/Bloomberg

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