Telecommunications and internet group SoftBank is preparing a deal to acquire a majority stake in We Company, the US-based operator of workspace provider WeWork, the Wall Street Journal reported yesterday.
SoftBank is already the largest investor in the company, which was valued at $47bn as of January 2019, but the financing will be provided at a significantly smaller valuation and is intended to keep the company afloat following its failure to go public last month.
The deal will likely involve $1bn in equity financing from SoftBank, which is negotiating a $3bn debt deal with investment bank JP Morgan, CNBC reported last week. Executives at We Co told the WSJ it will probably need about $3bn to make it through the next year.
We Co runs some 530 co-working spaces across the world but has suspended the signing of any more property leases and is reportedly preparing to significantly downsize its technology staff in addition to other non-core offerings in areas such as education or accommodation.
Pre-IPO reports stated that We Co could float at a valuation of $15bn to $20bn, but the prospective investment could value it at less than $10bn, some of the sources said. SoftBank had at one point planned to buy up to $750m of new shares in the offering.
The cash may partly be used to repay some $380m of bank loans taken out by founder and now deposed CEO Adam Neumann that put up his stake in the company as collateral, according to one source.
We Co has so far received some $11.5bn in debt and equity financing. SoftBank invested $2bn in January this year that followed $300m in early 2017, $4.4bn in primary and secondary funding in July 2017, $1bn in convertible note financing in August 2018 and $3bn in warrant financing agreed in November.
Earlier WeWork backers include hotel manager Shanghai Jin Jiang International and Legend Capital, the venture capital firm formed by conglomerate Legend Holdings, in addition to JP Morgan Investment Management, Fidelity Management and Research, T. Rowe Price, Goldman Sachs, Hony Capital, Benchmark and clients of Wellington Management.
