In what could help WeWork turn things around and get back on track, investor Softbank Group has agreed with We Group about the terms of a new capital infusion to keep the rapidly sinking company going. Softbank is committing $5 Bn in new financing and has also issued a tender offer for $3 Bn in buybacks for shareholders, giving WeWork access to a $8 bn+ war chest.
Softbank would also be fast-tracking an existing commitment, that is seeing it pour $1.5 Bn into WeWork. Phew! That’s some serious money coming WeWork’s way.
Meanwhile, the breakup of the cash infusion is as follows:
- WeWork will receive $1.5 billion from SoftBank’s April 2020 cash infusion into the company at $11.60 per share
- Tender offer for $3 billion worth of non-SoftBank owned shares at a price of $19.19 per share.
- Once the tender offer is completed, SoftBank Vision Fund’s interests in regional joint ventures with WeWork outside Japan can be swapped for WeWork shares at $11.60 per share’ and a debt facility of $1.1 billion in senior secured notes, $2.2 billion in unsecured notes, and a $1.75 billion letter of credit facility.
Of course, once all these transactions are completed, Softbank will end up owing a very substantial chunk of WeWork, 80% to be exact. If the company managed to achieve or exceed it’s previous high of $47 Billion valuation, Softbank’s current investments would be more than justified. Interestingly enough, the 80% stock does not automatically give Softbank access to majority votes at board meetings, due to WeWork’s twisted voting structures.
Also, Adam Neumann, ex-CEO and current executive chairman, will become a board observer. In fact, you have to give it to him. Despite erasing a huge chunk of shareholder value he has done pretty well for himself. As per reports, he will still retain a stake in the company, while also walking away with a figure that could potentially touch $1.5 Bn.
Speaking about the topic, Masayoshi Son, chairman and chief executive of SoftBank Group Corp, said:
SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution. It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced. Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support. We remain committed to WeWork, its employees, its member customers and landlords.
The future is still going to be a hot mess of challenges for WeWork. However, this cash infusion and Softbank’s confidence in its ability to turn things around is definitely going to help.
Marcelo Claure, the chief operating officer of SoftBank Group, who is taking over as WeWork’s Executive Chairman, said in a statement:
WeWork is redefining the nature of work by creating meaningful experiences through integrating design, technology and community. The new capital SoftBank is providing will restore momentum to the company and I am committed to delivering profitability and positive free cash flow. 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.