Softbank Group Corp. has set its eyes on the floundering WeWork. The shared office space company is looking forward to a financing package that Softbank had prepared for it, which would significantly increase Softbank’s stake in WeWork.
The Softbank Group Corp. Already owns roughly a third of WeWork, and a more significant stake would allow them more influence over what the company does in the future. A sad but hard fact about these events would be the co-founder, Adam Neumann, would have even less influence than he does now, for better or worse.
Softbank was already in negotiations for investing an impressive $1 billion to help WeWork do major restructuring within its corporate infrastructure. Without this new inflow of clash, WeWork is running a genuine risk of running out of capital before the year ends.
A String of Bad Luck
At the moment of writing, JPMorgan Chase & Co is in the middle of negotiating a $3 billion debt deal with WeWork after a botched initial public offering. This offering was forced to stop last month due to investors being concerned about how the initial offering was priced, and the business model it represented.
A WeWork spokeswoman released a public statement where she explained that the company had retained a significant financial institution. This Wall Street institution is meant to help arrange to finance. She continued by stating that roughly sixty financial sources have agreed to a confidentiality agreement. These sources will be meeting with this mysterious Wall street company’s management and its bankers during the coming week.
WeWork hasn’t been the best at financial management in these past two years. 2018 was met with an over $1.9 billion loss, with the company going over this in the current year. Now, in the first half of 2019, they have burned through an objectively impressive $2.36 billion in cash, at least according to the filings.
Unsurprisingly, global credit rating agencies have started to give WeWork a bad review due to their outrageous amount of spending. Standard & Poor has downgraded WeWork’s credit rating deeper in junk territory, with Fitch Ratings doing the same. Due to this, WeWork’s junk bonds are trading at a record low.
WeWork still has light at the end of the tunnel, however. They replaced the co-founder Neumann, who was working as the CEO, with two insiders: Artie Minson and Sebastian Gunningham. These two are taking joint CEO roles in an attempt to turn WeWork around.
The two have already made it clear that WeWork needs to return to its roots: Renting out trendy office spaces for freelancers and enterprises. This move is the opposite of what Neumann tried to do: Dipping his fingers into schools, apartment buildings, and various other businesses. Clearly, that didn’t work out for WeWork.