After a failing to proceed with its $47 billion IPO attempt, WeWork Softbank drama is getting closer to a middle ground compromise. According to the latest announcement, WeWork has accepted SoftBank rescue deal with 83% lower valuation. Chairman Neumann seems like is the winner as a result of this rescue deal with his WeWork exit.
22 October 2019, AtoZMarkets – According to the latest announcement WeWork board of directors have accepted the rescue deal proposal from SoftBank Group. With this rescue deal, SoftBank Group also takes control of WeWork – Office Sharing Startup.
WeWork Softbank IPO valuation drama
Softbank has been the largest WeWork investor, the company already owns 1/3 of WeWork. Before the latest rescue deal proposal, SoftBank Group’s WeWork exposure was $10.6 Billion.
Prior to the failed IPO attempts, WeWork was going after $47 billion valuation. However, with the latest rescue deal proposal, the new WeWork valuation is cut by 83% to just $8 billion.
WeWork’s Neumann votes for exit
Surely, Neumann would have liked to get a $47 billion valuation for his shared office startup. However, the latest Softbank rescue deal makes WeWork to be worth “just” $8 billion.
Softbank offered $5 billion in cash, as direct liquidity, in the form of debt. Additionally, the bank is proposing to accelerate the previous $1.5 billion equity commitment in the form of warrants due April.
According to WallStreet Journal, under the new rescue deal, WeWork founder Neuman will receive approximately $1.7 billion from SoftBank, by a new credit line and sell $1 billion worth of his WeWork stocks.
Now that WeWork valuation is cut by 83%. Chairman Neumann is almost out of picture, what is next for the shared office giant? Will Softbank Group be able to restructure Wework and its branches. Before, it finally goes for that glorious IPO path or it is game over?
From our perspective, the biggest issue will be around Neumann’s handling of investor funds. According to reports, Neumann had borrowed funds from WeWork’s investment funds, purchased properties in various business centers and leased it back to WeWork. How ethical and legal were these activities? We should see it soon.