SOFT BANK TAKES OVER WEWORK. JPMorgan Chase & Co. plans to submit a competing $5 billion debt package backstopped by the bank – By Todd Horwitz, Bubba Trading.

 


SoftBank to Take Control of WeWork

WeWork’s board is expected to meet Tuesday to weigh emergency-financing options including a takeover by SoftBank Group Corp. that would slash the co-working company’s valuation to about $8 billion and alleviate a looming cash crunch. 

Ahead of a Monday deadline to submit bids, SoftBank has offered to lend $5 billion to the struggling startup and accelerate a $1.5 billion equity investment that had been scheduled for next year, people familiar with the matter said. SoftBank also would offer to buy more than $1 billion of stock from existing investors and employees, some of the people said. The moves would boost its equity ownership above 50%.

JPMorgan Chase & Co. plans to submit a competing $5 billion debt package backstopped by the bank that would bring together a group of outside investors including Barry Sternlicht’s Starwood Capital Group.

SoftBank exec Marcelo Claure will be involved in the company’s management, likely as chairman, sources said. Former CEO Adam Neumann’s stake will fall to low double digits. Prior to the takeover, SoftBank had already invested $10.65 billion in the space-sharing company. Part of the new funding will debt financing involving warrants that were expiring, the sources said.

The anticipated SoftBank takeover marks the latest chapter in a dramatic year for what was at one point anticipated to be one of Wall Street’s hottest initial public offerings. Last month, the start-up terminated plans to go 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.

Such concerns peaked in July, when the We Co. agreed to pay Neumann $5.9 million in stock for the trademark to “We,” previously the property of We Holdings, an investment vehicle run by Neumann. Since Neumann’s departure last month, WeWork’s been laser-focused on raising new capital. The company has been in talks with J.P. Morgan to discuss a debt financing. Fallout from the controversies and subsequent plummet in value has led to a tense relationship between former Neumann and Softbank’s Son, who has invested billions into the start-up. The company was reportedly set to lay off at least 2,000 people, about 13% of its staff, as recently as last week. WeWork staff told the Guardian that they believe the cuts will not stop there, suggesting more of the company’s 15,000-person workforce could be sacked.

Todd “Bubba” Horwitz

Financial Markets and Political Commentary
 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.