WeWork facing crisis after SoftBank pulls takeover bid

Andrew Cummings
April 4, 2020

"The Special Committee will evaluate all of its legal options, including litigation", the committee, made up of Benchmark's Bruce Dunlevie and every other director, Lew Frankfort, stated in an emailed commentary. SoftBank shares rose 2.5% while the broader Japan market fell.

Townsend continued, 'Given our fiduciary duty to our shareholders, it would be irresponsible of SoftBank to ignore the fact that the conditions were not satisfied and to nevertheless consummate the tender offer'.

The Japanese conglomerate, which is the dominant shareholder of WeWork, had offered to buy the shares as a part of a bailout package last year after the company came close to running out of cash last year and had to withdraw its initial public offering.

Japanese investment powerhouse SoftBank has confirmed that it will not be purchasing $3 billion worth of WeWork shares, citing multiple "significant" criminal and civil investigations into WeWork and its finances among other factors. In the deal, the Japanese conglomerate would have taken a stake of nearly 80 per cent in the company and bought US$3 billion in shares from investors as well as current and former employees. The firm quickly lost cash, cancelled its IPO and Neumann was pushed out - albeit with a generous package.

The Japanese investment company had expected to book an unspecified non-operating loss from the planned purchase of the US firm's stocks in the business year ended March 31. Investors had been concerned about its losses and a business model that entails taking long-term leases and renting out spaces for the short term. Most of the money would have gone to five shareholders, including Mr Neumann and the venture capital firm Benchmark, which was looking to sell $600m in shares, Bloomberg has reported.

The decision was yet another dramatic turn of events at troubled WeWork, once hailed as a shining unicorn valued at $47 billion.

His net worth rose to $14bn previous year before dropping to $1.3bn at the time of SoftBank's bailout, according to Bloomberg's wealth ranking.

The latest deal is separate from SoftBank's bailout of WeWork itself, a package that included US$5 billion in new financing and the acceleration of an earlier US$1.5 billion commitment.

Still, the transaction has repercussions for WePaintings.

Neumann had been prepared to haul in $1 billion by tendering a slug of his stock to Softbank.

A merger of its US wireless unit Sprint with T-Mobile US was completed on Wednesday, which will provide an undetermined gain to be booked in the quarter ending June and will reduce strains on its balance sheet.

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