Softbank takes control of WeWork, invests $5 billion for 80% stake

Softbank takes control of WeWork, invests $5 billion for 80% stake

The company met with more than 100 investors to cobble together billions in bailout funding, but refused to match Softbank's offer for Neumann, according to reporting from CNBC.

As part of SoftBank's takeover arrangement, it will acquire roughly $1 billion of stock in WeWork's parent company from the co-working company's disgraced former CEO Adam Neumann, who was ousted last month after he faced pressure from investors following an utterly disappointing initial public offering, according to the Journal. "And yet somehow, Adam Neumann is walking away a billionaire".

In other words, WeWork is so broke that it needs to raise additional funds to fire people. Just five weeks ago, WeWork was planning an IPO that its bankers at JPMorgan and Goldman Sachs Group Inc. told company executives could fetch a valuation around $20 billion.

He now owns a little over a fifth of WeWork, and is expected to retain a stake.

When Neumann stepped down from the CEO role, it triggered terms of the loan that would have put him in technical default, according to a person familiar with the matter.

The almost $1 billion share purchase is part of a tender offer of as much as $3 billion from SoftBank to be extended to the company's employees and other investors. Even with the capital infusion and new ownership, it also leaves WeWork beset by woes that include sagging morale, landlord unrest and tens of billions of dollars in rent payments.

While Neumann's investors were willing to entertain his eccentricities since co-founding WeWork in 2010, his free-wheeling ways and party-heavy lifestyle came into focus once he failed to get the company's IPO underway.

The We Company's board will meet on Tuesday to evaluate SoftBank's offer against an alternative financing proposal from JPMorgan Chase & Co, the sources said.

While Neumann is giving up his voting stake in WeWork as well as his position as chairman, the deal will allow him to retain some financial stake in the company as well as an observer position on the company's board, meaning he will still be allowed to attend board meetings but will not have any voting power. "Since the vision remains unchanged, SoftBank has chose to double down on the company by providing a significant capital infusion and operational support", he added.

SoftBank will provide US$5 billion in new money to WeWork in the form of debt, the sources said.

Reuters first reported on Monday that Neumann was negotiating stepping down from the board and would serve as an adviser. SoftBank is reportedly looking at major layoffs across the company, in addition to removing leadership, as it hopes to turn the company profitable. The running of the We Company is now in the hands of its new co-CEOs, Artie Minson and Sebastian Gunningham. The plan would more than halve his stake to less than 10% of the shares and voting rights.

Neumann has also taken $700m out of the company through personal loans and stock sales.

"They realise that Neumann's continued involvement in the company would be a continued impediment to that".

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