Embattled co-working giant WeWork is in advanced talks with its largest investor to secure a deal that could see the company dramatically drop in value to US$8 billion on a pre-funding basis.
Japanese telecom giant SoftBank, founded by Masayoshi Son, will move to take control of The We Company, attempting to secure between 60 per cent and 80 per cent of the company.
CNBC reported that SoftBank will be making up to a US$3 billion tender offer along with a US$1.5 billion acceleration of equity it has already committed and US$5 billion in syndicated debt.
SoftBank’s Saudi Arabia-backed Vision Fund, which invested along SoftBank in earlier funding rounds, is not expected to contribute to the financing.
Prior to SoftBank's takeover plans, the investor had already placed US$10.65 billion into the space-sharing company.
The play by SoftBank caps off a dramatic two-month period for The We Company in which it saw founder Adam Neumann step down as chief executive, after a botched attempt to take the closely-watched company public.
Its much-anticipated IPO prospectus in August revealed a huge $900 million loss in the first six months of 2019 and drew worries over its corporate governance practices.
The We Company, now a cautionary tale, saw its rapid uptake around the globe fuelled by the backing from its investors, led by SoftBank.
In the nine years since its founding, the closely-watched company expanded to 528 locations in 111 cities and 29 countries, with further plans to open a further 169 locations.
Since Neumann’s departure last month, WeWork’s been focused on raising new capital is said to be belt-tightening.
Several of the startups it acquired are reportedly for sale and it is widely reported that the company is preparing for mass layoffs.
Analysts believe WeWork could collapse under the weight of its massive operating lease obligations, which increased from US$34 billion to US$47 billion in just the first six months of 2019.
WeWork is now expected to go public in 2020, and is said to be in negotiations with JPMorgan for a last-minute cash infusion.
WeWork’s vice chairman Sebastian Gunningham and the company’s president and chief operating officer Artie Minson are currently serving as WeWork’s co-CEOs.
