Tag: Softbank

SoftBank’s bailout of WeWork: founder wins, most others lose

I’m writing this post on a transcontinental flight to London. My habit prior to boarding these flights is to download a bunch of content ranging from Amazon Prime movies to various periodicals including the Financial Times and The New York Times. I also carry a book with me — a real one, not a Kindle version. I try to avoid doing work unless it’s urgent as I find my productivity to be too low relative to working out of my office, and try to stay off the in-flight Wifi which is irritatingly slow anyway.

Scanning through the FT app on my iPad, I’ve noticed that the WeWork saga has taken another turn for the worse. WeWork’s board has agreed to a $6.5 billion bailout package from SoftBank, coming in the form of equity and loans. I predicted in an earlier post that WeWork will end up pursuing a deal with SoftBank rather than with JPMorgan, and that is exactly how it’s playing out.

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Softbank’s reported $5 billion rescue package to WeWork: throwing good money after bad?

The Japanese media just announced that Softbank Group has provided the We Company (which runs WeWork) with a $5 billion rescue package proposal. The package would be provided by Softbank Group, not the Softbank Vision Fund, and would not involve Softbank taking majority voting rights in We or consolidating We as a subsidiary. I would imagine this might mean the some of the funding would be via loans or preferred share issuances rather than just common equity. It’s also reported that We is in talks with JPMorgan Chase as well, involving an issuance of bonds by We.

My guess here is that Softbank is going to end up “winning” this deal, if being selected to invest in a flawed and perhaps unsustainable business could even be considered “winning”. A deal with JPMorgan is probably going to come with cripplingly high interest rates (I’m guessing 10% or higher given the elevated risk of bankruptcy and the lack of viable options for We). Also, Softbank has a greater vested interest in seeing that We survives, given the many billions ($11 billion cumulatively for a 29% stake) that it has already invested in the company at the common equity level, not to mention that it has partially staked its reputation on We succeeding.

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