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SoftBank To Take Control Of WeWork In Reported Bailout

In the aftermath of WeWork’s yanked IPO and impending cash crunch, how the company would secure enough capital to stay alive has been a popular Silicon Valley parlor game. The answer, everyone presumed, was SoftBank.

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That’s holding up this week, with CNBC reporting that the Japanese conglomerate is ready to “spend somewhere between $4 billion and $5 billion on new funding and existing shares,” a move that would give SoftBank “as much as 70% or more control of WeWork.”

SoftBank, between its own capital pools and its famous Vision Fund, has invested billions already into the troubled giant. Once valued at $47 billion (by SoftBank itself, it’s worth noting), WeWork’s value has collapsed amidst comical corporate governance, staggering cash burn, stiff operating and net losses, and more.

Softbank started pouring billions into WeWork in 2017, when it led the company’s $4.4 billion Series G. It then led a $3 billion funding round in November 2018, and led WeWork’s $1 billion Series H in January 2019. Softbank also led $1 billion in debt financing in August 2018.

WeWork morphed from visionary corporate leader (to some, at least) to a possible sign of the peak of today’s technology expansion. That it has come to a bailout would surprise all of our 2017 selves.

Capital Conflagration

SoftBank putting more capital into WeWork is a wager that will be watched closely by market participants and the public alike. The cliche regarding time and its ability to tell will come into play once we learn whether SoftBank committed an error thanks to some sort of sunk cost fallacy, or if the investing giant saw a real chance to snag a commanding piece of a company it can turn around.

Certainly, there are efforts afoot to right the ship, though perhaps in the case of WeWork we should say that the are efforts in play to ground the jet, close the school, and, we hope, divest the wave pool.

If those cost control measures — stapled to improved corporate governance — can fix WeWork remains to be seen. And, even if they can, we won’t be privy to much. With its IPO yanked, WeWork won’t likely file new financial results for some time. We’ll be in the dark somewhat regarding its performance.

What we do know about the company is nigh-terrifying. From our prior reporting:

Here are a few numbers regarding its cash supply and consumption from its IPO filing:

  • WeWork cash and equivalents, June 30 2019: $2.47 billion

  • WeWork net cash used by operations, H1 2019: $198.7 million

  • WeWork net cash used by investing activities, H1 2019: $2.36 billion

The clock is ticking. SoftBank is betting that it can cut and buff WeWork into something valuable and sustainable. We’ll see.

Illustration: Li-Anne Dias.

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