SoftBank Infuses Over $10 Million in WeWork; Pays Roughly $1.7 Billion to Adam Neumann to Give up His Rights
- BY Jaspreet Kaur
Feature Writer, BusinessEx
- Oct 23,2019
- 10 Mins Read
Space-sharing startup, WeWork is facing financial threats post flotation failure. The company has recently been rescued by its investor, SoftBank that is holding the largest stakes in the co-working firm. SoftBank has reportedly confirmed that it has decided to infuse over $10 billion to buy the US-based firm. Furthermore, the Japanese firm has paid out nearly $1.7 billion to WeWork’s co-founder, Adam Neumann to give in his exercising powers.
Reuters reported that amid fear of layoffs, the co-founder of WeWork, Neumann has made a $685 million transaction with the Japanese investor, SoftBank to exit from the parent firm of WeWork, The We Company. In return, the Japanese firm has agreed to offer Neumann $500 million to support his credits and anticipated to pay an additional $185 million to him as a consulting fee.
SoftBank said it would provide $5 billion in new financing and up to $3 billion for existing shareholders, BBC reported citing the company’s official statements.
With this transaction, SoftBank’s stake will be increased in WeWork to nearly 80 per cent, the cited media agency reported.
This move ends the turbulent phase of WeWork that would be cash strapped anytime in the following months. The firm was once pegged at $48 billion but the poor direction of Neumann set the company close to its doom.
How WeWork Will be Saved?
In the concord, SoftBank reportedly will enhance the commitment to offer $1.5 billion besides supporting and issuing a tender offer to existing stakeholders.
"Softbank has decided to double down on the company by providing a significant capital infusion and operational support," BBC reported citing Softbank’s chairman, Masayoshi Son statements.
"SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work," Son added.
Reportedly, Marcelo Claure, present CEO at SoftBank, will replace Adam Neumann after his exit from the company. Claure will be commissioned as executive chairman at the WeWork board.
Staggering Sail of WeWork
As threats are looming over WeWork, the investment deal is likely to save the company from collapse.
The startup had started its journey from a single space in New City and steadily increased to 500 locations throughout the globe. However, it has incurred substantial losses of approximately $900 million in the first six months of the financial year.
While preparing for flotation, the investors questioned financial stability and governance of the co-working space, WeWork. After witnessing investors’ reaction and knowing the company’s low valuation, the idea of launching the IPO was dropped.
Further, the governance of Neumann was impeached and later, the co-founder was enforced to step down from his role. Neumann’s self-opulence, party lifestyle, and poor management were blamed for the company’s downfall.
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