WeWork said to weigh bailout that hands control to SoftBank

WeWork is working with JPMorgan Chase & Co to negotiate a US$3 billion debt deal after a planned initial public offering was tabled last month.
WeWork is working with JPMorgan Chase & Co to negotiate a US$3 billion debt deal after a planned initial public offering was tabled last month.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - WeWork is considering a bailout that will hand control of the co-working giant to SoftBank Group Corp, according to a person familiar with the matter, one of two main options to rescue the once high-flying start-up.

The Japanese investment powerhouse controlled by billionaire Masayoshi Son is convinced it can turn around the cash-strapped American company with the right financial controls in place, the person said, asking not to be identified talking about internal deliberations.

WeWork's board and backers however are also weighing another option: JPMorgan Chase & Co is leading discussions about a US$5 billion (S$6.86 billion) debt package, Bloomberg has reported.

Either rescue package would ease a cash crunch that could leave the office-sharing company short of funds as soon as next month. The office-sharing start-up had been headed toward one of the year's most hotly anticipated IPOs before prospective investors balked at certain financial metrics and flawed governance, turning the American giant into a cautionary tale of private market exuberance and costing the company's top executive his job.

The fast-growing, money-losing start-up had been counting on a stock listing - and a US$6 billion loan contingent on a successful IPO - to meet its cash needs.

The Wall Street Journal first reported that SoftBank may be discussing a deal to gain control of WeWork. Representatives for the Japanese company weren't immediately available for comment on Monday (Oct 14), a national holiday.

SoftBank is already WeWork's biggest shareholder but the proposed deal would shore up its control of the start-up, the person said, declining to elaborate on when a decision on the competing offers might be reached. The Japanese company is in advanced talks to acquire more shares at a significantly lower valuation than the US$47 billion WeWork sported in January, two people familiar with those discussions said last week. The New York Times has reported that members of the board would meet on Monday to decide on which bailout to select.

If the board ops for the SoftBank deal, the Japanese company will be taking on a troubled enterprise at a time it's struggling to convince the market about its longer-term investment vision. It's also busy wooing potential investors for a successor to its record-breaking Vision Fund.

 
 
 
 

Son is going through a rocky stretch after repositioning his company from a telecommunications operator into an investment conglomerate, with stakes in scores of startups around the world. He built a personal fortune of about US$14 billion with spectacularly successful bets on companies such as Alibaba Group Holding Ltd. But SoftBank's shares are down about 30 per cent from their peak this year as investors, unnerved by WeWork and Uber Technologies Inc's disappointing debut, grow skittish about startup valuations. In an interview with the Nikkei Business magazine, Son said he is unhappy with how far short his accomplishments to date have fallen of his goals.

WeWork and Uber may be losing money now, but they will be substantially profitable in 10 years' time, Son said in that interview. But at a private retreat for portfolio companies late last month, he had a different message: get profitable soon. At the gathering, Son also stressed the importance of good governance. Just days later, SoftBank led the ouster of WeWork's controversial co-founder Adam Neumann.

"WeWork has retained a major Wall Street financial institution to arrange a financing," a representative for the US company said in a statement on Sunday. "Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company's management and its bankers over the course of this past week and this coming week."