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How SoftBank Fueled WeWork’s Pipe Dream — And Vice Versa

Aayat AlibyAayat Ali
October 25, 2019
in News
Reading Time: 1 min read
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WeWork helped put coworking on the map in a way that had never been done before thanks to its former larger-than-life CEO Adam Neumann and an investor who believed in the company.

Masayoshi Son, CEO of SoftBank, invested about $9 billion into WeWork and stamped it with a $47 billion valuation earlier this year.

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Now, the company has lost 93% of its peak private market valuation after its hopes to go public came crashing down.

Earlier this week, Son announced it would buy back around $3 billion worth of WeWork stock from Neumann, current investors and employees with a valuation of $8 billion.

Son’s fund will now invest $1.5 billion into WeWork and lend it another $5 billion, bringing its debt and equity in WeWork to $18.5 billion.

As part of this bailout deal, SoftBank will pay Neumann a cool $1.7 billion for his shares and $500 million for him to repay loans from JPMorgan.

The WeWork saga has played out like the script of a soap opera, but how exactly did we get here?

SoftBank’s Vision Fund manages $100 billion, which was screaming to be spent. This led Son to invest in companies that grow at a rapid pace by selling services to large markets below their costs. When these types of companies go public, they can’t make a profit. 

Despite what seemed like a sly master plan, investors saw right through WeWork’s charade one its S-1 filing came to light, leading the company to cancel its IPO and oust Neumann as CEO.

Tags: daily_digest
Aayat Ali

Aayat Ali

Aayat is an editor for the Daily Digest based in Lexington, Kentucky. She has worked with local coworking spaces since August of 2017 and enjoys taking her firsthand knowledge to write about the fascinating, constantly evolving world of flexible workspaces.

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