Doubling down: SoftBank shares fall on plan to rescue WeWork

Shares of Japan’s SoftBank Group Corp fell two percent in early trading in Tokyo on Wednesday as the tech conglomerate moved to take over beleaguered United States-based office-space sharing startup WeWork with a funding injection of around $10bn.

“SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution,” SoftBank Chairman and CEO Masayoshi Son said in a joint statement with WeWork.

Once the deal is finalised, SoftBank will own around 80 percent of WeWork, according to the statement.

The deal takes SoftBank’s total investment in WeWork to more than $19bn, sources had told Reuters on Tuesday, with the money-losing startup now valued at just $8bn.

SoftBank’s rescue marks a stunning reversal of fortunes for WeWork, which has lost nearly $39bn of its valuation over the past five weeks, during which it scrapped its hotly anticipated public debut, removed co-founder Adam Neumann as CEO and launched a cost-cutting plan after starting to run out of cash. 

SoftBank’s shares have fallen 30 percent from their July peak as investor scepticism grows over the path to profitability for its cash-burning marquee investments like WeWork and publicly listed ride-hailing firm Uber Technologies Inc.

As recently as last month, Neumann was preparing to take WeWork public as chief executive after attaining a $47bn valuation for it in January. The company abandoned its initial public offering when investors questioned its large losses, the sustainability of its business model and the way it was being run by Neumann.

While WeWork employees now face the prospect of thousands of layoffs, Neumann has secured a $685m side deal with SoftBank to step down from the board of WeWork’s owner, The We Company, according to people familiar with the arrangement.

SoftBank Chief Operating Officer Marcelo Claure will succeed Neumann and become The We Company’s executive chairman, WeWork said in its statement.

Neumann, 40, is not the first founder of a major startup to be forced to step down recently. Uber Technologies Inc cofounder Travis Kalanick resigned as CEO of the ride-hailing startup in 2017 after facing a rebellion from his board over a string of scandals, including allegations of enabling a chauvinistic and toxic work culture.