Fast-growing startup WeWork claims to be revolutionizing the market for office space but it delayed its share offering after a cool reception to its hefty valuation
Fast-growing startup WeWork claims to be revolutionizing the market for office space but it delayed its share offering after a cool reception to its hefty valuation GETTY IMAGES NORTH AMERICA / SCOTT OLSON

SoftBank is reportedly trying to gain full control of WeWork Companies by increasing its stake via a financing package.

According to the latest news by the Wall Street Journal, the SoftBank package aims to invest several billion dollars in equity and debt, and force a major restructuring.

Japan-based SoftBank already owns almost one-third of WeWork under the SoftBank vision fund investment.

SoftBank’s move will further dent the influence of co-founder Adam Neumann, the report added. In September, Neumann was ousted from the CEO position and two company insiders were appointed Co-CEOs.

WeWork has been working with JPMorgan Chase to negotiate a $3 billion debt deal after deferring a planned IPO in September, per stock market news, because of investor concerns on valuation and its business model.

During the run-up to the initial public offering plan, many analysts had warned of a cash crisis in WeWork. The co-working space company exhausted $1.9 billion in 2018 and $2.36 billion was the cash burn until the first half of 2019.

According to an analysis by securities house Sanford C. Bernstein, WeWork could run out of money in the second quarter of 2020 at its current burn rate and pose risk to WeWork careers.

Several global credit rating agencies Standard & Poor’s and Fitch Ratings have downgraded WeWork’s credit ratings into junk.

The newly appointed co CEOs Artie Minson and Sebastian Gunningham emphasized the need for WeWork’s return to its core business of renting out trendy office space.

They wanted an end to the company’s fringe activities that Neumann had forayed into such as running schools, renting apartment buildings, and other loss-making businesses.

Real estate ambitions crashed

WeWork’s real estate plans named WeLive had big hype. It was envisaged as sleek dormitory spaces for working professionals with incentives like free beer and catered Sunday dinners.

Barring two locations in the U.S, it failed to expand globally. The first location for WeLive was a 27-story ex-office building on Wall Street opened in 2016 where residents were taken under annual leases.

However, WeWork spokeswoman Gwen Rocco, said: “WeWork will continue to operate our existing WeLive locations, delivering an exceptional, community-based living experience for our members in New York City and Northern Virginia every day."

Last Friday, the company announced WeGrow, another subsidiary, and a for-profit private school would shut in 2020. The school opened in the Chelsea neighborhood of Manhattan was run by Neumann’s wife Rebekah.

Meanwhile, companies entering the co-working space are showing growth in the number and notable players include Impact Hub, Your Alley, Knotel, District Cowork, Make Offices, Industrious, and Techspace.

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