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Now that Neumann is gone, the SoftBank Group which is WeWork’s largest investor, is considering pumping a lot more money into the troubled startup. The deal, if completed will give SoftBank more control of the company.
SoftBank Group Corp., a Japanese multinational conglomerate holding company and the largest investor in WeWork, is currently deliberating on investing an additional $1 billion into the space sharing startup. This deliberation involves the revisiting certain terms in the warrant agreement between the two firms.
Before now, SoftBank had concluded terms with WeWork for an investment of $1.5 billion before the company’s issues seemed to intensify, forcing it to discontinue its earlier agreed-upon plans for an initial public offering (IPO). If this new deal is struck, Softbank will now be investing a total of $2.5 billion into the office-sharing firm. This would also lower the price per share for the We Work stock, ultimately giving SoftBank a much bigger stake in the company.
Three years ago, Softbank Group’s founder, Masayoshi Son, began the $100 billion Vision Fund project and is already turning a huge profit from the endeavour. So far, SoftBank and Vision Fund have already plugged about $10 billion (including the aforementioned $1.5 billion) into WeWork and if this deal is closed, the number will rise to $11 billion at the very minimum.
The new funding just might be the closest semblance to a breath of fresh air for the largely loss-making WeWork. The company has had its fair share of woes which began long before the failure of its IPO. Several issues have also trailed WeWork including its strange corporate governance methods and indiscriminate spending, which forced Son to initiate a move to remove Adam Neumann as CEO.
Because of the company’s structure which gave Neumann unmatched authority, the move to oust him was thought to most likely fail. However, efforts made by Son proved to be a success as Neumann eventually did step down from his position as CEO.
Furthermore, WeWork’s valuation at the time SoftBank invested back in January this year, was placed at $47 billion but by the time the IPO was close, this figure had dropped ridiculously, all the way down to $10 billion. Now that new management is expected to take over, many believe that there just might be a chance for WeWork after all.
Already, WeWork has reached out to several financial institutions to raise capital up to $4 billion and if SoftBank’s deal happens, it is generally thought that the company might have a better chance to receive funds from more investors.
However, for things to really bloom again, the current executives and board of WeWork might have to make certain uneasy changes to shore up all of its losses and reduce its potential for waste as well. Since Neumann has ceded control, making the right moves might become a tad easier than it was, even a few days before now.
Already, it’s been reported that the two WeWork co-chief executives who were recently pushed up to the position, are considering some drastic changes. Sebastian Gunningham and Artie Minson, are said to be deliberating on laying off a large percentage of the company’s current 12,500 staff strength, and also completely terminating certain company projects that are not directly connected to office sharing.