The board of the troubled co-working space provider is set to meet today to evaluate emergency debt financing packages including a possible takeover by Softbank group and provide a lifeline for the company that is fast running out of cash, The Financial Times reported.
SoftBank is proposing to spend anywhere between $4 billion and $5 billion on new equity and existing shares to the struggling startup. Under the rescue plan, it will also accelerate a $1.5 billion equity investment that had been scheduled for next year. If this equity infusion proposal is approved by the WeWork board, SoftBank will own more than 50% of WeWork. SoftBank and its Vision Fund 's combined stake in We Work of is currently between 27% and 29%.
WeWork was valued at a whopping $47 billion when Softbank last invested in January. Under the proposed rescue plan, its valuation sharply reduce the co-working company’s valuation to about $8 billion
The Wall Street Journal reported that JPMorgan Chase & Co. also plans to submit a competing $5 billion debt package that would bring together a group of outside investors including Barry Sternlicht’s Starwood Capital Group.
The latest series of events represents a staggering decline for a company that had announced in August that it will file for an IPO. The company was hoping to raise $3 billion to $4 billion by issuing new equity from its now aborted IPO attempt.
Ever since the company indicated its plan to list in the stock market, prospective investors have raised questions over the ability of the shared office provider to become profitable anytime soon. WeWork reported net losses of $1.9 billion for 2018.
Several questions have been raised on the company's adherence to corporate governance norms.
The company’s founder CEO Adam Neumann came under intense scrutiny for possible conflicts of interests over receiving a payment of $6 million from the company for the trademark rights to the “We” branding. Neumann subsequently stepped down as CEO amid reports that SoftBank, wanted to oust him.
The company's pre-listing filing with regulators reveals that a total of $20.9 million in lease payments were made to four properties in which Neumann had an interest. The founder received $11.6 million back in “tenant improvement reimbursements” till last year.
WeWork has also been projecting itself as a tech company rather than as a real estate company. Tech companies typically are valued at much higher amounts than real estate companies. For instance, WeWork's main competitor IWG has a market capitalisation of £3.7 billion despite having a larger footprint in the commercial office rental space.
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