NEW YORK CITY — The We Co., parent company of coworking office space operator WeWork, and SoftBank Group Corp. have reached an agreement under which SoftBank will provide $5 billion in new financing and a tender offer of up to $3 billion for existing WeWork shareholders. SoftBank, a Japanese technology conglomerate, will also accelerate an existing commitment to fund $1.5 billion. WeWork chose the rescue offer from SoftBank over a competing proposal from JPMorgan Chase & Co.
The announcement comes after well-documented concerns about the coworking giant’s cash flow and leadership. The company’s valuation plunged after it scrapped its initial public offering. WeWork founder Adam Neumann was forced out of his chief executive position after pushback from prospective investors.
“It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced,” says Masayoshi Son, chairman and CEO of SoftBank. “Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support.”
After closing and following the tender offer, SoftBank’s economic ownership stake in WeWork will be approximately 80 percent, up from about one-third currently. Since SoftBank will not hold a majority of voting rights at any stockholder or board meeting and does not control the company, WeWork will not be a subsidiary of SoftBank. It will function as an associate of SoftBank.
In connection with the agreement, WeWork’s board will appoint Marcelo Claure, COO of SoftBank, to the position of executive chairman of WeWork’s board of directors. Neumann will become a board observer.
“As important as the financial implications, this investment demonstrates our confidence in WeWork and its ability to continue to lead in disrupting the commercial real estate market by delivering flexible, collaborative and productive work environments to our customers,” says Claure.
Separately, SoftBank is expected to give a $1.7 billion windfall to Neumann, including buying nearly $1 billion of his shares and paying a $185 million consulting fee, according to The Wall Street Journal.
As of the second quarter, New York-based WeWork had 528 locations in more than 111 cities and 29 countries.
— Kristin Hiller