SoftBank likely to abandon $3b deal with WeWork investors

WeWork at Shoreditch, London. Photo by Uygar Kilic on Unsplash

SoftBank Group Corp. plans to let the deadline for a $3 billion deal with WeWork shareholders expire without completing the agreement to buy more equity, despite threats of legal action from some members of the company’s board, according to people familiar with the matter.

SoftBank had previously agreed to buy shares from former Chief Executive Officer Adam Neumann, venture capital firms and employees, but notified stockholders in mid-March that conditions for the deal hadn’t been met. The deadline for investors to tender their shares is 11:59 p.m. New York time.

The people asked not to be named because the matter is private. Discussions are still under way and it’s possible the two sides could work out a last-minute agreement, one of the people said. SoftBank didn’t immediately respond to requests for comment.

The share purchase was hammered out in October as part of SoftBank’s bailout of WeWork after the co-working company’s failed initial public offering left it weeks away from running out of money. In the deal, the Japanese conglomerate would have taken an ownership stake of almost 80% in the company and buy $3 billion in shares from investors as well as current and former employees. Neumann, ousted in the deal, was set to sell up to $970 million in shares. The generous exit package angered many of his employees, thousands of whom had their jobs eliminated in the following months as WeWork parent We Co. tried to cut its expenses.

In the past few weeks, the deal has become increasingly contentious. SoftBank sent a letter to WeWork shareholders saying it could withdraw from the agreement if certain conditions weren’t met by the April 1 deadline. SoftBank cited regulatory concerns and a handful of government investigations into WeWork, including from the U.S. Securities and Exchange Commission and the Justice Department.

“Neither SoftBank nor the company can offer any assurances regarding the scope of these investigations, the nature of any actions that these or other regulatory parties will take, or the timing within which they will be resolved,” the Japanese company said in its letter, arguing it has no obligation to complete the tender offer.

Two of WeWork’s independent board directors responded, saying they would consider legal action if SoftBank pulled out.

“The Special Committee of the WeWork Board of Directors remains committed to taking all necessary actions to ensure that the tender offer which SoftBank has promised to our employees and shareholders is completed,” a spokeswoman for Benchmark Capital’s Bruce Dunlevie and another independent director, Lew Frankfort, had said in a statement. “Its excuses for not trying to close are inappropriate and dishonest.”

The latest deal is separate from SoftBank’s bailout of WeWork itself, a package that included $5 billion in new financing and the acceleration of an earlier $1.5 billion commitment. Most of the money would have gone to five shareholders, including Neumann and the venture capital firm Benchmark, which was looking to sell $600 million in shares, Bloomberg has reported. Less than 10% of the proceeds would have gone to current WeWork employees, SoftBank has said.

Still, if the transaction falls apart, it will have repercussions for WeWork As part of the deal, the company would get $1.1 billion in debt financing from SoftBank only if the share purchase is completed.

Bloomberg

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.