WeWork has secured itself a financial lifeline following its botched initial public offering (IPO).
According to multiple media reports, WeWork has secured a $9.5-billion U.S. rescue package from SoftBank Group Corp. in a deal that hands 80% of the company to the Japanese conglomerate.
The transaction was officially announced in Tokyo on Wednesday and ends a tumultuous period for WeWork, a troubled co-working company that was forced to shelve plans for an IPO last month after its valuation plummeted from $47 billion U.S. to about $8 billion U.S. amid lukewarm interest from investors.
WeWork’s IPO debacle and subsequent need for a bailout is being treated as a cautionary tale on both Wall Street and throughout Silicon Valley.
Founder Adam Neumann was forced to resign from the company’s Board of Directors and is being replaced by SoftBank Executive Chairman Marcelo Claure. Neumann is leaving with $1.2 billion U.S. in WeWork stock and a $185 million U.S. consulting fee, according to media reports.
The deal with SoftBank includes $5 billion U.S. in new financing and is a much-needed reprieve as the company was on track to run out of money later this month. The company is expected to fire thousands of employees by November.
The SoftBank bailout was one of two options the WeWork Board was considering to keep the company afloat. The other alternative was a $5 billion U.S. debt package presented by JPMorgan Chase & Co., which included $2 billion U.S. of pay-in-kind bonds yielding 15%. In the end, WeWork’s Board decided that the SoftBank deal was best for the company.
