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SoftBank Finally Agrees To Take Over Wework

SoftBank Finally Agrees To Take Over Wework
Japan’s investment firm SoftBank Group Corp has clinched controlling stake of WeWork by paying off its co-founder Adam Neumann and with an investment of more than $10 billion to add on to the significant investments made by the company earlier.
This deal ensures a secure future for WeWork following its debacle at launching its initial public offering last month and heavy spending bringing down its cash at hand to precarious levels. It had been reported that the United States based office-space sharing start-up will have used up all its cash by the end of next month without an investment lifeline. With this investment, the total investment that SoftBank has made so far in the company, which is now valued at just $8 billion, touched more than $19 billion. During the last investment round in January, WeWork was valued at $47 billion.
On the other hand, this very significant devaluation of WeWork has also affected SoftBank because it is trying to set up a second Vision Fund and is seeking to raise as much as $108 billion from investors. To prevent further devaluation of WeWork, SoftBank has its job cut out – reducing the losses being made by the company and devising a way to make its operations profitable. WeWork has not made a single year of profits so far.
This much needed rescue financing from SoftBank also completes the circle for Neumann who went from being the founder and CEO of one of the most valued startups to being completely ousted from the company he helped start. It was also just a month ago that Neumann was leading WeWork to its public listing as the company’s chief executive.  
According to reports quoting sources from The We Company, it is likely that there would be massive layoffs at WeWork even as a $685 million side deal with Softbank was struck by Neumann in exchange for stepping down from the company’s board as its owner.  
Reports said that out of the $10 billion investment by SoftBank, about half of it would be provided as debt to the company. The offer from SoftBank was accepted by WeWork against an alternative offer of a similar amount from JPMorgan Chase & Co in the form of debt.
Reports also quoted sources that a previous $1.5 billion equity commitment to WeWork is to be accelerated by SoftBank. This investment is in the form of warrants that are due to mature in April next year.
Reports also said that SoftBank wants to acquire the rest of the shares of WeWork form the current investors and employees of the company and is planning on launching a tender offer for up to $3 billion. Sources have said that the Japanese firm will also put a ceiling of $970 million for the ability of Neumann to sell his shares which currently amounts to a little more than one fifth of the company and it is expected he would retain s smaller stake.

Christopher J. Mitchell

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