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SoftBank Not To Go Ahead With $3 Billion Tender Offer For WeWork

SoftBank Not To Go Ahead With $3 Billion Tender Offer For WeWork
Last year Japanese investment company SoftBank had agreed to a tender offer for additional WeWork shares with shareholders worth $3 billion which has now been terminated by the Japanese firm. This has now raised the threat of legal actions while deepening the problems and crisis for the already struggling office space rental company. 
Factors such as criminal and civil investigations into WeWork, the failure of the startup to restructure a joint venture in China and the economic impact of the coronavirus pandemic were cited by the Japanese tech investment giant for refusing to proceed with the deal any further, the company said and added that this was its duty to the shareholders of Softbank.
While expressing disappointment at the decision of SoftBank, WeWork's board said that it is considering "all of its legal options, including litigation.", said a special committee of the board.
Since SoftBank has now refused to go ahead with the deal, it means that the Japanese investing company is no longer obligated to allow a further $1.1 billion in debt financing for WeWork. The development reflects the depth of the problems for WeWork even as the company currently is passing through a phase of massive restructuring and is facing threat to revenues because of stay and at home and work from orders, as well as national lockdowns imposed in many countries because of the coromavirus pandemic.
"WeWork is in real trouble and SoftBank's withdrawal from the share purchase worsens the situation materially," Richard Windsor, an independent analyst, wrote in a note.
Last week, the company informed its shareholders that it had $4.4 billion in cash and cash commitments and hence it is in a position to rode out the current economic down turn because of the pandemic despite the company reporting a loss of $1.25 billion in its third quarter.
An agreement for the tender offer was achieved in October last year as part of a bailout plan by SoftBank following the failure of WeWork to launch its IPO, and it was reported that the deal would have benefited only a section of the shareholders of the company including its ousted co-founder Adam Neumann.
The once highly valued company had lost its luster among investors as questions and concerns were raised about the continued loss making by the company as well as the very business model of the company which entailed taking on long-term leases and then renting out the buildings or spaces in them in the short term.
It was reported in November last year that an investigations had been initiated against WeWork by the New York State Attorney General over allegations that the now ousted founder Neumann was involved in self-dealing to make himself rich. No comments on the issue have been made so far by WeWork.
There were "multiple, new, and significant" pending criminal and civil investigations and the investigators have also asked for information about the financing activities and communications with investors indulged in by WeWork, SoftBank said in its statement.

Christopher J. Mitchell

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