Published: Tue, October 22, 2019
Electronics | By Kelly Massey

WeWork board accepts SoftBank rescue deal , Garage

WeWork board accepts SoftBank rescue deal , Garage

This summer, WeWork appeared to be headed toward a rich initial public offering.

JPMorgan Chase & Co. has been preparing a separate financing package to present to the WeWork board, another person said.

The cancelled public offering also left WeWork, which lost US$900 million in the first half of the year, without a crucial source of funding: a US$6-billion loan that had been contingent on a successful entrance into the public market.

An IPO filing by We Co. revealed that WeWork, which had a high-flying valuation of $47 billion following a $2 billion funding round by SoftBank announced in January, had a net loss of $1.9 billion past year.

SoftBank will emerge with between 60% and 80% of WeWork's equity under the package, which involves $5 billion of new debt, injecting $1.5 billion in equity and an offer to buy up to $3 billion of existing shares.

The iconoclastic Neumann, who helped propel WeWork to an eye-popping $47 billion valuation, was listed as a risk factor in the company's prospectus because his leadership and vision were considered essential to the company's success.

The board of the We Company, which owns WeWork, will consider the competing offers from SoftBank and JP Morgan at a meeting on Tuesday, it was widely reported.

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Softbank group CEO Masayoshi Son answers a question during a press conference announcing the company's financial results in Tokyo, August 7, 2019.

SoftBank, WeWork and JPMorgan either declined to comment or couldn't immediately be reached.

SoftBank has lined up Mizuho Financial Group Inc as part of its syndication of the $5 billion debt package, one of the sources said. The startup had amassed more than $10 billion in commitments from SoftBank. The other is Lew Frankfort, who is the former CEO of luxury handbag maker Coach.

In September, S&P Global downgraded WeWork's credit rating, citing doubts about the company's ability to "meet its capital investment funding needs and liquidity covenant over the next 12 months", the firm said in its action. He will maintain a stake in the company and remain a board observer. The Japanese firm has invested around $10 billion in the company to date.

During the attempts to woo IPO investors last month, Neumann was criticized by corporate governance experts for arrangements that went beyond the typical practice of having majority voting control through special categories of shares. Neumann was even paid almost $6 million by WeWork for the trademark rights to the word "We" during the company's rebranding. He can also assign two board seats and will get a roughly US$185 million consulting fee.

Neumann, 40, is not the first founder of a major start-up to be forced to step down recently.

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