(Reuters) – SoftBank Group Corp. agreed to pay more than $10 billion of U.S. office space sharing startup WeWork on Tuesday, doubling down on an ill-fated investment, and paying off, his co-founder, Adam Neumann, not to be out of control.
FILE PHOTO: a japanese SoftBank Group, Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, on November 5, 2018. REUTERS/Kim Kyung-Hoon
The deal represents a stunning reversal of fortune for WeWork, as well as its second-largest shareholder, SoftBank, which has committed more than $13 billion in the equity capital of a company which is now valued at $8 billion.
The bailout will come like SoftBank’s Chief Executive Masayoshi Son is looking to investors to persuade to take part in the Japan-based company’s second mammoth Vision Fund, for which he is seeking to raise $108 billion.
The tribe of WeWork, the bleeding, SoftBank will need to reverse the widening losses, and has to find a way to make it profitable.
The rescue funding also marks a dramatic fall from grace for the Stand, which, for the past month and was preparing to WeWork public as well as the chief executive, after $47 billion in value for the old.
While at WeWork, employees are now faced with the prospect of thousands of layoffs, Neumann has created a $685-million side-deal with, they turned to the act of the board of directors of WeWork, the owner of The Company, according to people familiar with the plan
Stand facing margin calls on his personal loans at WeWork’s own stock, as a result of the collapse in the valuation of the company.
SoftBank has agreed to extend a $500 million loan to repay a line of credit from JPMorgan Chase & Co., as well as to pay him the $185-million euro fee for a four-year contract as a consultant for WeWork, one of the sources said.
Neumann had drawn the $395 million in the JPMorgan chase credit line, the sources added. Under the terms of the deal with SoftBank, it should make full use of the proceeds from the sale of the shares of the first amount of the loan extended to it by SoftBank, according to the source.
Even if he has to give to its board of directors meeting, Construction will have two representatives at WeWork, the board, in accordance with one of the sources.
Reuters first reported on Monday, the Stand was to negotiate the withdrawal of the board of directors and to serve as a consultant.
“The consultancy agreement, it is mind-boggling. It’s terrible governance, ” said Nell Minow, vice-chairman of the shareholder’s consultancy firm, ValueEdge Coverage. “Why pay the guy who got WeWork is in this mess is to ask for advice. It is up to you to add insult to injury, and it is a little more on the injury as well.”
However, some of the WeWork investors said they supported the deal.
“Adam is a visionary who has managed to create an impressive business that has transformed the way in which a lot of people have to work, live and think. We think he’s earned it to get some money off the table, for his contribution to the company,” said the Blue one Capital, managing partner, and Matt Novak. He declined to say how large the company’s interest in the WeWork is.
SoftBank said it will be a $5 billion debt package, WeWork, consisting of $1.1 billion of senior secured notes, $2.2 billion in unsecured bonds and a $1.75 billion letter of credit facility. WeWork is picked SoftBank’s offer an alternative to the $5 billion debt package that was submitted on Monday by JPMorgan chase.
- SoftBank shares fall, as the double at WeWork
SoftBank said it will speed up from a prior $1.5 billion of private equity stakes to WeWork, in the form of stock options, which expired in April at a price of $ 11.60 per share.
SoftBank is added, it will launch by the end of the year, a tender offer for up to $3 billion to acquire the WeWork shares from existing investors and employees at a price of $19.19 per share.
Neumann’s ability to tender their shares will be reduced to $970 million, which is one of the sources said. Currently, he is the owner of a little more than one-fifth of WeWork, and it is expected that the maintenance of a ring to it.
SoftBank said it will own 80% of the WeWork in the quote, however, not for the first-time consolidation of the company in the books of account, as it will not be in the ownership of a majority of the voting rights.
They turned, and the first for the $100 billion Vision to Fund about one-third of the WeWork because of previous investments by a total of $10.6 billion.
In all, the aim of the Fund is in the best interests of its regional joint venture with WeWork to outside Japan, will be exchanged for shares in the WeWork at $11.60 per share, SoftBank said.
“We hope that Softbank can perform to enhance the vision, through the increase of strategic partnerships, tort, or otherwise, and of the value of WeWork, the minority shareholders,” he said to the Blue of the Capital city of Noval, adding that his company will retain its importance because of the view, they turned the offer price is too low.
WeWork, leaving the initial public offering last month, after investors questioned its significant losses, the viability of the business model and the way in which it was carried out by Neumann, who had been the CEO title last month. He retained his position as chairman of the Company.
SoftBank’s Chief Operating Officer Marcelo Claure will succeed, Neumann, and Company’s executive chairman.
“The new capital, SoftBank is providing going to be a boost for the company, and I am committed to provide you with the profitability and a positive free cash flow generation,” Claure said in a statement.
Artie Minson, previously, WeWork’s chief executive officer (ceo) and Sebastian Gunningham, who was the vice-president of the company, are serving as co-chief executive officers.
While the Construction’s investor was willing to entertain his eccentricities, since the co-founding of the WeWork in 2010, and his free-wheeling ways of the party-heavy lifestyle came into the picture after he failed to get the company’s IPO on the course.
During the attempts to woo the IPO to investors in the past month, the Stand, it was criticised by corporate governance experts for the benefit of which went beyond the normal practice of having a majority of control through special classes of shares.
These include the cost of his estate, and a big say in his successor as chief executive officer, and the joining of the voting power of the shares and how much they donated to charity. Neumann had entered into several transactions with WeWork, which the company is a lessee, in certain of its properties, and the charge of the rent.
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Neumann, 40, has not been the first founder of a major startup, was forced to resign recently. Uber Technologies Inc., co-founder, Theo Kalanick to resign as chief executive officer of the journey from start up in 2017, after facing a revolt by its board of directors has, over a series of scandals, including accusations of using the services of a chauvinistic and a toxic culture.
“As I see it, if SoftBank’s moonshot is to get to WeWork back on his hands and knees,” said Eric Talley, a professor of law at Columbia Law School. ”
“They have to realize that the Construction of the continuing involvement in the business, it would be a constant barrier to that.”
Reporting by Jessica DiNapoli, Greg Roumeliotis and Joshua Franklin in New York, and Anirban Sen in Bangalore; and Jane Lee, of San Francisco; Editing by Arun Koyyur), Steve Orlofsky, Tom Brown, and Lincoln’s y.