SoftBank is backing out of its plan to buy $3 billion of WeWork shares, including nearly $1 billion from former CEO Adam Neumann

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  • SoftBank is abandoning its plan to buy $3 billion worth of WeWork shares from other investors and employees, including some $970 million worth from company cofounder Adam Neumann, according to person with direct knowledge of the matter.
  • The move likely means WeWork itself won’t be able to tap into a $1.1 billion credit line from SoftBank.
  • The share purchase effort and credit line were part of the WeWork rescue package SoftBank announced last fall; WeWork still has access to most of the financing SoftBank promised under that plan.
  • Visit Business Insider’s homepage for more stories.

SoftBank has decided to back out of a big part of its WeWork bailout package. 

The company will not go through with a planned purchase of $3 billion worth of shares from other investors and employees, including former CEO Adam Neumann, a source with knowledge of the matter told Business Insider. The decision also likely means that WeWork itself won’t be able to tap into a $1.1 billion credit line from the Japanese conglomerate; that debt financing was conditioned on SoftBank completing its share purchase plan.

WeWork spokeswoman Valerie Sarnataro declined to comment on or confirm Bloomberg’s report. SoftBank spokeswoman Sarah Lubman also declined to comment.

Bloomberg previously reported SoftBank’s decision to abandon the share purchase.

SoftBank announced its $3 billion tender offer last fall as part of its plan to rescue WeWork after the real-estate giant’s failed initial public offering. Some $970 million of the offer was due to go toward buying shares from Neumann, WeWork’s cofounder, who was ousted from his roles as CEO and chairman after the failed IPO. The tender offer was due to expire at midnight New York time Wednesday.

SoftBank could be in for a fight from other WeWork investors

The Wall Street Journal had previously reported that SoftBank was considering walking away from its share purchase plan. The conglomerate reportedly warned WeWork investors earlier this month the real-estate giant wasn’t in compliance with the terms of the tender offer due to the fact that it is under investigation by the Securities and Exchange Commission and the Justice Department.

The decision to abandon the offer could put SoftBank at odds with other investors, including those also represented on WeWork’s board of directors. WeWork directors Bruce Dunlevie, who is a partner at venture capital firm Benchmark, Lew Frankfort, the CEO of Coach, have previously threatened to take legal action against SoftBank if it didn’t follow through with its share purchase plan.

As part of its rescue package, SoftBank sped up a previously planned $1.5 billion equity investment in WeWork, underwrote a $1.75 billion credit line from Goldman Sachs and other financial institutions, and offered a $3.3 billion credit line of its own to the company. WeWork only stands to lose out on $1.1 billion of the $3.3 billion SoftBank credit line as a result of the abandoned credit facility.

WeWork was once the crown jewel of SoftBank’s $100 billion original Vision Fund, with a valuation of some $47 billion. But public investors frowned on the company’s massive losses, high costs, and questionable executive transactions, forcing WeWork to abandon its IPO effort even after offering to cut its valuation by nearly 75%.

After the failed IPO, WeWork was mere weeks away from running out of money before SoftBank stepped in with its rescue package. That package helped stabilize the company for the short-term, but it’s still burning through copious amounts of cash — more than $1 billion in the fourth quarter alone.

Got a tip about WeWork or SoftBank? Contact Troy Wolverton via email at [email protected], message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. Contact Meghan Morris via Signal at 646.768.1627 using a non-work phone, email at [email protected], or Twitter DM at @MeghanEMorris. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: There are only 3 kinds of startups, according to this VC. Here’s why getting them confused leads to disasters like WeWork, Casper and other famous IPO fails.

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