SoftBank has walked away from its $3 billion deal to purchase WeWork stock in what would have been a last ditch effort to save the coworking firm from collapse.
This is a huge halt in the WeWork rescue plan that involved SoftBank pouring billions of dollars into the firm in an attempt to recover its initial investment.
Now, reports reveal that WeWork’s board is considering a lawsuit against SoftBank as things look increasingly grim for the company, particularly as the coronavirus has left many of its facilities to close down.
WeWork was once one of the most promising startups in the world, with the company having prepared to go public with a $47 billion valuation in 2019. Weeks later, the company imploded and burned through $40 billion due to the illusory truth effect — say something enough, and you’ll start to believe it. In WeWork’s case, it would have been the mantra of being a technology company, rather than a real estate firm.
WeWork had long used technology as an excuse to inflate its valuation compared to classic real estate companies. In reality, technology plays a miniscule role in WeWork’s every day operations. It has an app for members to use, but that is the case for several coworking spaces across the world. It also claims to track how its facilities are used by members and make design changes accordingly, but again this method is used by landlords everywhere.
The next few months will be crucial to WeWork’s survival, but its ability to withstand the current health crisis is unlikely.