Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

SoftBank's WeWork takeover would lead to Adam Neumann's exit: sources

Stock Markets Oct 21, 2019 08:44PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Neumann, CEO of WeWork, speaks to guests during the TechCrunch Disrupt event in Manhattan, in New York City

By Greg Roumeliotis, Anirban Sen and Joshua Franklin

(Reuters) - SoftBank Group (T:9984) offered nearly $10 billion on Monday to WeWork and its shareholders under a takeover plan that would keep the U.S. office-space sharing start-up afloat and lead to the exit of its Chairman Adam Neumann, sources said.

WeWork could run out of cash as early as next month without new financing, sources have said, after the company pulled plans in September for an initial public offering (IPO).

It abandoned the IPO when investors questioned its large losses, the sustainability of its business model and the way WeWork was being run by co-founder Neumann, who gave up his CEO title last month and now serves as board chairman.

WeWork owner The We Company's board will meet on Tuesday to evaluate SoftBank's offer against an alternative financing proposal from JPMorgan Chase & Co (N:JPM), the people, who were familiar with the matter, said.

JPMorgan faces challenges in putting together a debt package for WeWork, because it has not underwritten it and is trying to find banks and institutional investors to back it, the sources added.

SoftBank has offered $5 billion in new money to WeWork in the form of debt, the sources said. It is also proposing to accelerate a previous $1.5 billion equity commitment to WeWork in the form of warrants that are due in April, the sources said.

This commitment was made in January at a $47 billion valuation, but SoftBank is now seeking to renegotiate it at a valuation of about $8 billion, the sources added.

SoftBank is also proposing to launch a tender offer for up to $3 billion to acquire WeWork shares from existing investors and insiders, including Neumann, the sources said. Based on the outcome of the tender offer, SoftBank could own between 60% and 80% of WeWork but will seek to avoid consolidating the company on its books, one of the sources added.

SoftBank and its $100 billion Vision Fund already own about a third of WeWork through previous investments totaling $10.6 billion.

Neumann could step down from The We Company's board as part of the deal with SoftBank and become an adviser, according to the sources. SoftBank Chief Operating Officer Marcelo Claure would succeed Neumann as chairman, the sources said.

WeWork, SoftBank and JPMorgan declined to comment. A spokeswoman for Neumann declined to comment.

SoftBank has lined up Mizuho Financial Group Inc (T:8411) as part of its syndication of the $5 billion debt package, one of the sources said. The package comprises letters of credit for more than $1 billion, as well as senior secured and subordinated bonds, the source added.

Mizuho declined to comment.

The We Company’s seven-member board tasked two directors with representing the interests of all investors in the company by sitting on the special committee considering the financing plans, Reuters reported earlier this week.

One is Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital. The other is Lew Frankfort, who is the former CEO of luxury handbag maker Coach.

Artie Minson, previously WeWork’s chief financial officer, and Sebastian Gunningham, who was a vice chairman at the company, are now serving as its co-chief executives.

Facing a cash crunch, WeWork is seeking to slow down its expansion, reducing the number of new property leases it is taking on.

The We Company’s board has also agreed on a cost-cutting plan that includes layoffs, Reuters reported last week. The cuts will occur over the coming weeks, the sources added.

FALL FROM GRACE

Neumann's exit from The We Company's board would represent a dramatic fall from grace, given Wall Street's expectations earlier this year that he would lead one of corporate America's most hotly anticipated stock market debuts.

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.

During the attempts to woo IPO investors last month, Neumann was criticized by corporate governance experts for arrangements that went beyond the typical practice of having majority voting control through special categories of shares.

These included giving his estate a major say in his replacement as CEO, and tying the voting power of shares to how much he donates to charitable causes.

Neumann had also entered several transactions with We Company, making the company a tenant in some of his properties and charging it rent. He has also secured a $500 million credit line from banks using company stock as collateral.

Neumann, 40, is not the first founder of a major start-up to be forced to step down recently. Uber Technologies Inc (N:UBER) co-founder Travis Kalanick resigned as CEO of the ride-hailing start-up in 2017 after facing a rebellion from his board over a string of scandals, including allegations of enabling a chauvinistic and toxic work culture.

SoftBank's WeWork takeover would lead to Adam Neumann's exit: sources
 

Related Articles

Stocks swing higher as China eases quarantine rules
Stocks swing higher as China eases quarantine rules By Reuters - Jun 28, 2022 7

By Julie Zhu HONG KONG (Reuters) - Asian shares swung into positive territory in afternoon trade on Tuesday, propelled by China's decision to ease some quarantine requirements for...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
JJ McDougal
JJ McDougal Oct 21, 2019 10:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
People like Neumann should be banned from the business world forever and put in walls of shame all over. Let's go back to some degree of decency shall we???
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email