SoftBank Group is on a damage control mode to rescue co-working giant WeWork (one of its high-profile portfolio companies) from imminent collapse. According to Wall Street Journal, SoftBank is giving final touches to a financial package that will infuse fresh capital in the shared office company.
Japanese tech conglomerate’s fresh capital infusion will help WeWork to stay afloat amid the severe liquidity crisis that the company is currently facing. If reports are to be believed then the co-working rental giant would completely run out of cash within next two-three months if it does not raise fresh capital from investors.
Apart from SoftBank’s financial help, the San Francisco based company is also reportedly working with JPMorgan Chase to raise $3 Bn through debt route. Wall Street Report claims that several financial institutions have signed confidentiality agreements and are continuously negotiating with the management to facilitate debt financing round.
It should be noted that WeWork was simultaneously working for a debt financing round even before its IPO got collapsed.
Meanwhile, Japanese tech conglomerate’s fresh fund infusion would mean that it will get even more greater control over the co-working company. It is already one of the largest stakeholders in the company and would possibly became the most powerful member in the company’s board of director team once the fresh fundraising round goes through.
Not to mention that once the fresh funding goes through the already ousted CEO Adam Neumann’s role in the company will be further diluted. Neumann will became as good as a non-entity in his founding company, a case that is pretty similar to Uber’s Travis Kalanick.
It has become increasingly important for SoftBank to resurrect WeWork from the current mess, especially after Uber’s and Slack’s IPOs turned to be a huge dud. WeWork and Uber’s IPO were supposed to make Japanese tech giant run to their banks with a huge fat cheques.
Uber and Slack’s continued underperformance in the capital market and WeWork’s IPO botch is also clearly taking toll on SoftBank’s stock. Japanese tech conglomerate’s share prices have fallen by at least 25% over the last two days as investors are apparently getting jittery. Market experts estimate that Masayoshi Son’s company will lose as much as $5 – $6 Bn from Uber and Slack’s lackluster performance and WeWork’s IPO embarrassment.
SoftBank’s other high portfolio companies like Brandless and Zume are also failing to fire and this has further casted shadow on the ability to raise second version of its highly ambitious vision fund.