The proposals for a $5 billion financing deal for the office sharing company WeWork form its largest shareholder Japan’s SoftBank Group Corp and its main lender JPMorgan Chase & Co is being considered very seriously by the parent company of WeWork, The We Company, which has set up a special board committee to dive into the details of the proposal, said a report published by the news agency Reuters. .
According to reports published earlier, Softbank has proposed taking up a controlling stake WeWork against the investment which is critical for the office space sharing company given its precarious cash at hand situation and after a steep drop in its valuation following its failed IPO attempt last month. According to recent reports, the company could run out of cash as soon as this November at the current rate of spending and would therefore be in deep trouble if it is unable to secure new investments.
There was no comment available from WeWork and The We Company.
The report said that the special committee will comprise of only have two members – both of whom are directors at the We Company board. The main mandate of the committee will be to uphold the interest of the shareholders while seeking out financing routes.
The Reuters report identified one of the committee members as Bruce Dunlevie – a general partner at WeWork shareholder Benchmark Capital, and the other is Lew Frankfort – the former CEO of luxury handbag maker Coach.
There will be no representative from SoftBank, the report said. However a representative of the Japanese company, President Ron Fisher, is present on We Company’s seven-member board. Also on the board is the former Goldman Sachs Group Inc investment banker Mark Schwartz, who served as a SoftBank director until earlier this year.
Despite resigning as the CEO last month, the co-founder of WeWork, Adam Neumann, still remains the chairman of the board of the company. But he has not been included in the committee, the report said.
The proposed IPO by WeWork had to be cancelled after there were major concerns expressed by investors about he increasing losses being made by the company and the business model that it followed and whether that model could lead the company to profitability. These concerns resulted in the valuation of the company dropping from about $47 billion in January to about $10 billion just before the IPO was to be launched.
The drop in valuation and lowering cash reserves forced WeWork to put a rein on its expansion activities, a reduction in the number of new properties for leasing and contemplating some job cuts.
Apart from proposing a new investment of $5 billion in WeWork, SoftBank also wants to renegotiate an earlier investment of $1.5 billion that it had made in the form of warrants and which are due to be paid in April at a valuation of $47 billion for the company, said the report. The Japanese investment firm has already made an investment of $10 billion in WeWork.
(Adapted from Reuters.com)