WeWork Accepts $5 Bln Lifeline Funding From Softbank
(RTTNews) - WeWork, the troubled commercial real estate company that provides shared workspaces for technology startups, agreed to receive the much needed $5 billion funding from SoftBank Group Corp. The Japanese conglomerate also agreed to launch a tender offer of up to $3 billion for existing shareholders, and will accelerate an existing commitment to fund $1.5 billion.
SoftBank, which already holds stake in WeWork, will hold economic ownership of approximately 80 percent after the tender offer.
Under the agreement, SoftBank Chief Operating Officer Marcelo Claure will be appointed as WeWork Board's Executive Chairman, effective upon closing of the accelerated $1.5 billion payment commitment.
Further, Adam Neumann, WeWork founder and former CEO, will become a Board observer, and the Board will receive voting control over Neumann's shares.
Neumann came under fire after the company's prospectus filing for the IPO revealed heavy losses and a wide discrepancy in the distribution of power between him and the company's other shareholders. In early October, reports said WeWork parent company We Co. is planning to lay off thousands of workers.
Last month, Neumann stepped down as the company's CEO following pressure from board members and investors. He called the increased scrutiny he faced in recent weeks "a significant distraction." Following the resignation of the CEO, the office rental company also announced it would withdraw its IPO plans.
In the latest statement, the companies announced that WeWork will be an associate of SoftBank and not a subsidiary. The bank will not hold a majority of voting rights at any general stockholder meeting or board of directors meeting and does not control WeWork.
Masayoshi Son, Chairman & CEO of SoftBank, said, "It is not unusual for the world's leading technology disruptors to experience growth challenges as the one WeWork just faced. Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support."
WeWork expects the funding would provide it with significant liquidity to execute its business plan to accelerate efforts to profitability and positive free cash flow.
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