Oct 22, 2019

How SoftBank plans to save WeWork

Illustration: Aïda Amer/Axios

WeWork's board this morning will vote on whether to accept a rescue package from SoftBank or one arranged by JPMorgan.

The big picture: SoftBank's package includes a massive bribe... errr, I mean golden parachute... errr, I mean "consulting contract" for Neumann.

  • But, as Axios first reported yesterday, there have been fairer votes in North Korea. Adam Neumann still controls the voting stock and he's got around 200 million reasons to support SoftBank.

The deal: In exchange, I'm told that he'll support the SoftBank transaction, give up his future voting rights, and step down as chairman. He'll also get a line of credit to help soften his existing liabilities, and get to participate big in a $3 billion tender offer for existing WeWork shares (at $20 a pop).

  • J.P. Morgan and partners like Starwood Capital were willing to really extend themselves, but paying Neumann to go away was a bridge too far. As CNBC's Alex Sherman tweeted, Jamie Dimon will do anything for love, but he won't do that.
    • As an aside: Dimon's personal involvement with WeWork, including in the IPO run-up, likely saves the jobs of underlings who otherwise could have been thrown under the bus.
  • Multiple sources say that WeWork's co-CEOs, Artie Minson and Sebastian Gunningham, will resign. This does not appear to be at the request of SoftBank, which will name Marcelo Claure as executive chairman and then launch a CEO search.
  • Minson and Gunningham did have a massive layoff plan ready to go, but now SoftBank will be in charge of the pink slips.
  • SoftBank's new investment will come off its balance sheet, not from its Vision Fund.
  • All WeWork shareholders, including employees and investors, are eligible to tender up to 33% of their shares. For Neumann that could mean up to a $970 million payday, but he'd still have around $2 billion of exposure.

The bull case is that SoftBank offers WeWork its best path to salvation, because it helps reward some long-term employees via the tender and isn't predicated on reviving the IPO for 2020. Plus, SoftBank clearly maintains sincere optimism for the business, or else it wouldn't throw so much good money after bad.

The bear case is that SoftBank enabled Neumann's worst impulses and, from the perspective of many insiders, helped set fire to the company's reputation in the first place. Plus, there's the head-scratching decision late last month to have Claure help identify cost-saving and revenue opportunities at WeWork, even though SoftBank already had two directors on the WeWork board.

The bottom line: You break it, you own it.

Go deeper

WeWork accepts SoftBank's rescue package

Illustration: Aïda Amer/Axios

WeWork said in a statement Wednesday it has accepted a multibillion-dollar rescue package from SoftBank that gives the Japanese firm an 80% stake in the company.

Why it matters: Per Axios' Dan Primack, who first reported that the deal was about to happen, it'a dramatic development in a "saga that has seen the embattled company plunge from a $47 billion valuation to below $8 billion."

Go deeperArrowOct 23, 2019

The board bungle behind WeWork's fall

Illustration: Aïda Amer/Axios

WeWork last night made it official: SoftBank will pump $9.5 billion into the beleaguered company, including a $3 billion stock tender, $5 billion of new debt, and $1.5 billion that is being accelerated from an existing equity commitment.

The big picture: There's been lots of talk of how this mess will impact startup valuations, business models, and IPO opportunities. But far too little on how it should impact board oversight and founder control.

Go deeperArrowOct 23, 2019

SoftBank chairman Masa Son admits poor judgment over WeWork

Photo Illustration: Eniola Odetunde. Photo via Yoshikazu Tsuno/Getty Images

SoftBank’s second Vision Fund “is going to be launched as scheduled” and be roughly the same size as the first, chairman Masayoshi Son said on Wednesday during the Japanese conglomerate’s quarterly earnings, although he declined to share more details.

Why it matters: That’s in spite of the storm of challenges it’s currently weathering, including rumored fundraising woes and its biggest problem child, WeWork.

Go deeperArrowNov 6, 2019