- SoftBank may not buy $3 billion of WeWork shares from existing investors.
- SoftBank believes that regulatory probes against the company and its founder, Adam Neumann, give it an out under the deal struck last fall.
- The news could spell disaster for WeWork, which is already struggling to cut costs.
Several news sources reported yesterday afternoon that SoftBank may not buy $3 billion of WeWork shares from existing investors. The stock purchase was part of a financial rescue following WeWork’s failed IPO last year. SoftBank had already invested $1.5 billion as part of the bailout deal in October, 2019.
According to sources, SoftBank could withdraw from the agreement as it believes “regulatory probes into the startup’s business, including from the Securities and Exchange Commission and Justice Department, give it an out under the deal struck last fall.”
The news could spell big trouble for WeWork as the coworking company has heavily relied on SoftBank’s investments to remain afloat over the past couple of years, most significantly following the botched IPO attempt from 2019.
Since the cancelled IPO, the coworking company has sought to cut costs through layoffs and the sale of side businesses. Since founder and former CEO, Adam Neumann, was ousted, the company has laid off over 2,400 staff members. Reports from just a few days ago, before the news from SoftBank were out, claimed that WeWork was considering laying off up to 1,000 workers more this year. That number could very well increase if SoftBank fully withdraws from the bailout deal.
Another Hit to Adam
Not only would the company be severely affected by SoftBank’s decision, but Adam Neumann would also be personally hit. According to Bloomberg, “Adam Neumann, who was ousted as chief executive officer during the turmoil, was slated to sell as much as $970 million in stock as part of the deal.”
According to sources, since November last year, SoftBank had been thinking of ways to reduce the purchase amount to limit Neumann’s payout.
Will WeWork Survive?
It’s still unclear whether SoftBank will fully withdraw from the deal, negotiate a lower price, or delay the purchase.
In either case, WeWork would be negatively impacted and the company might be forced to close several locations, halt ongoing negotiations with landlords, and lay off even more staff. Worst case scenario, the company’s 10 years might be all it gets.
WeWork needs the money to continue its operations, even as it halts growth and sells side businesses. If SoftBank withdraws from the deal, WeWork’s survival might depend on whether any company is willing to take over.