Softbank Abandons $5bn WeWork Bailout


Japanese telecom giant Softbank has abandoned long-standing plans to bail out stricken co-working giant WeWork, withdrawing a $US3 billion (A$4.9bn) share tender.

The announcement was made during a WeWork board committee on Wednesday.

Last month, WeWork's dominant shareholder SoftBank threatened to pull out of the stock purchase due to a government investigations into the company.

SoftBank had been aiming to protect its previous investment of about $US10 billion (A$16bn) in co-working company when it was valued at $US47 billion (A$77bn) at the beginning of last year.

“The tender offer closing was conditioned on the satisfaction of certain closing conditions agreed to in October,” SoftBank chief legal officer Rob Townsend said in a statement.

“Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.”

As part of its rescue plans, SoftBank accelerated a US$1.5 billion (A$2.5bn) equity investment into WeWork last year and had said that it would stand behind another US$4 billion (A$6.5bn) of debt financing.

In October, SoftBank hired lawyers from Weil, Gotshal & Manges, a corporate law firm known for its financial restructuring specialists, to help sort through We’s finances and advise on the potential investment.

WeWork's board said in a statement on Wednesday that it was “surprised and disappointed” by SoftBank's move. It added that it would “evaluate all of its legal options, including litigation”.

It caps off a disastrous 12 months for WeWork with its sudden unravelling commencing in August of last year when the company's paperwork—highlighted corporate governance issues—was made public in the lead up to its highly-anticipated public offering.

The company was forced to abandon its plan for its IPO as investors questioned big losses, the company's risky model, and co-founder Adam Neumann, who subsequently stepped down as chief executive.

The struggling office-sharing company managed to secure $US1.75 billion (A$2.56bn) in financing in a fundraising push led by Goldman Sachs in December.

Despite that, WeWork’s losses have subsequently ballooned as it has spent huge sums taking on new leases and refurbishing its locations.

The global coronavirus pandemic has also left investors nervous in the face of a global recession with many businesses withdrawing guidance, investment plans and shutting up shop.

Social distancing restrictions at workplaces aimed at preventing the spread of the virus has kept many WeWork tenants away.

The global shutdown spells trouble for WeWork with many major cities where it operates indefinitely under lockdown.

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