TOKYO – Japanese company SoftBank announced on Wednesday details of a multi-billion dollar rescue package for WeWork, a deal that will increase SoftBank’s stake in the company to around 80 percent.
In a statement released in New York and Tokyo, the two companies agreed on “significant funding” which seeks to “accelerate” WeWork’s path to profitability and a “positive free cash flow.”
As part of these agreements, SoftBank Group’s chief operating officer and executive chairman of mobile phone company Sprint, Marcelo Claure, will replace WeWork co-founder Adam Neumann as the executive chairman of the board.
The agreement includes $5 million in new financing, a figure that Japanese and US media had already revealed.
It will launch a tender offer to purchase shares worth $3 billion at a price of $19.19 per share, in a process expected to begin in the fourth quarter of this year.
SoftBank will also “accelerate” a commitment announced in April this year to provide $1.5 billion, which the two parties expect to complete seven days after the approval of WeWork shareholders.
Once the offer to purchase shares is complete, SoftBank will become the owner of about 80 percent of WeWork, although it “will not hold a majority of voting rights at any general stockholder meeting or board of directors.”
For that reason, “WeWork will not be a subsidiary of SoftBank,” but an associate of the Japanese company, the statement said.
WeWork had previously received funding of some $10 billion from the Vision Fund, which includes SoftBank and sovereign wealth funds from Saudi Arabia.
The statement included remarks from the chairman and CEO of SoftBank Group, Masayoshi Son, who stressed that WeWork is “at the forefront of (a) revolution” linked to “massive transformation in the way people work.”
“Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support,” added Son.
Neumann, who resigned last month as CEO of WeWork in the midst of a company crisis that led to the postponement of his Wall Street debut, will lose weight on the board of directors and will only be an “observer.”
The statement said that the board of directors “will be expanded” and will receive voting control over Neumann’s shares, but it does not elaborate further.
The Japanese newspaper Nikkei, citing sources with knowledge of the situation, reported that SoftBank will buy WeWork shares held by Neumann in WeWork’s parent company, We Co., worth $970 million.
Neumann will only keep 10 percent of WeWork shares, the newspaper added.
Claure said in the statement released by SoftBank that this agreement would allow WeWork to “restore momentum” and demonstrate the confidence placed in that company by the Japanese corporation.
The announcement was received with a 2.58 percent decrease in SoftBank securities on the Tokyo Stock Exchange, mid-session.
The coworking space company was valued at about $47 billion, but in September, before the postponement of its stock market debut in New York was confirmed, it fell below $20 billion.
According to company documents, We Co. had net losses of $1.9 billion in 2018.