SoftBank seeks to take control of troubled WeWork

JPMorgan Chase also in talks to bail out US co-working giant

NEW YORK • WeWork is considering a bailout that will hand control of the co-working giant to SoftBank Group, 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 US company with the right financial controls in place, the person said, asking not to be identified.

WeWork's board and backers, however, are also weighing another option: JPMorgan Chase & Co is leading discussions about a US$5 billion (S$6.8 billion) debt package.

Either rescue package would ease a cash crunch that could leave the office-sharing company short of funds as soon as next month.

The start-up had been headed towards one of the year's most hotly anticipated initial public offerings (IPOs) before prospective investors baulked at certain financial metrics and flawed governance, turning it 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 of the Japanese company were not immediately available for comment yesterday, 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 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 reported that members of the board were expected to meet yesterday to decide on which bailout to select.

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

Mr Son is going through a rocky stretch after repositioning his company from a telecommunications operator into an investment conglomerate, with stakes in scores of start-ups around the world. He built a personal fortune of about US$14 billion with spectacularly successful bets on companies such as Alibaba Group Holding.

But SoftBank's shares are down about 30 per cent from their peak this year as investors, unnerved by WeWork and Uber Technologies' disappointing debut, grow skittish about start-up valuations.

In an interview with the Nikkei Business magazine, Mr Son said he was 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, he said.

But at a private retreat for portfolio companies late last month, he had a different message: Get profitable soon. At the gathering, he 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 WeWork's representative said in a statement on Sunday.

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A version of this article appeared in the print edition of The Straits Times on October 15, 2019, with the headline 'SoftBank seeks to take control of troubled WeWork'. Print Edition | Subscribe