SoftBank gains 80% stake in WeWork with $9.5-billion rescue

WeWork announced on Wednesday it has accepted a rescue package from SoftBank Group Corp., its largest investor, that will give the Japanese conglomerate an 80% stake in the company.

The deal marks the end of an era for the troubled co-working giant, which raised money at a $47 billion valuation in January, pulled out of a botched initial public offering attempt last month and is now valued at less than $8 billion in the bailout.

WeWork founder Adam Neumann will leave the company’s board as part of the package, to be replaced by SoftBank executive and newly appointed Executive Chairman Marcelo Claure.

Neumann is set to walk away from the deal with as much as $1.2 billion in WeWork stock, a $500 million credit line from SoftBank and a roughly $185 million consulting fee, people familiar with the matter have said. Neumann will remain connected to the company as a board observer.

The deal with SoftBank, which includes $5 billion in new financing and an acceleration of a $1.5 billion existing commitment, grants a reprieve to WeWork parent We Co., which was on track to run out of money as soon as next month.

The company has been racing to slash costs since it pulled its IPO paperwork in September, and is expected to fire thousands of employees this month.

“This is exactly the reason why people are suspicious about actual valuations of unicorn companies,” said Mitsushige Akino, an executive officer with Ichiyoshi Asset Management Co. in Tokyo. “There will be a lot of SoftBank investors that will think it’s crazy to invest this much money into one company.”

The capital infusion doesn’t give the Japanese conglomerate a majority of voting rights and WeWork will be treated as an associate, not a subsidiary. That might allow SoftBank to wield influence at WeWork without having to show all of its liabilities on the balance sheet.

SoftBank’s shares fell as much as 3.5% in Tokyo on Wednesday, their biggest intraday drop in three weeks. The stock pared its losses after the announcement.

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SoftBank gains 80% stake in WeWork with $9.5-billion rescue