SoftBank takes over 80 Percent of WeWork, Names New Executive Chair

Marcelo Claure, Chief Operating Officer of SoftBank, will succeed Neumann and become the Executive Chairman of The We Group
SoftBank is already the largest shareholder in WeWork
Yet, due to the complex ownership structure of WeWork, SoftBank will not currently hold a majority of voting rights at any stockholder or board of directors meeting.

WeWork and SoftBank have reached an agreement that will see the Japanese tech giant buy out about 80% of the beleaguered real estate company. Marcelo Claure, Sprint’s former CEO, purchased by SoftBank in 2012, will be WeWork’s new executive chairman. The founder and CEO, Adam Neumann, who seeks more than $1 billion to leave, will become a “panel spectator” without voting power. WeWork’s co-CEOs remain Artie Minson and Sebastian Gunningham.

SoftBank is already the largest shareholder in WeWork, with over $10 billion. The new deal includes $5 billion in additional investment, $1.5 billion already promised for the future, and a $3 billion tender offer outside SoftBank for existing shareholders. Nevertheless, WeWork says that SoftBank at any company meeting will not have a majority of voting rights, rendering it an “associate” rather than a branch.

The deal marks a remarkable turnaround of WeWork’s fortune as well as its largest shareholder, SoftBank, which has pledged more than $13 billion in capital to a company now worth only $8 billion.SoftBank is going to have to reverse its rising losses and find a way to make it profitable.

Rescue funding also represents a dramatic decline in grace for Neumann, who was preparing to take WeWork public as chief executive after a $47 billion valuation in January for it as recently as last month.

Although WeWork workers are now facing the prospect of thousands of redundancies, Neumann has reached a side deal of $685 million with SoftBank to step down from WeWork’s operator, The We Group, according to people familiar with the arrangement.

The bailout comes as SoftBank Chief Executive Masayoshi Son tries to convince investors to participate in the second mega Vision Fund of the Japanese company, for which he aims to raise $108 billion.

Masayoshi Son downplayed the essence of what can only be described as an exceptional bailout. “It’s not uncommon for the world’s leading technology disruptors to encounter as the one WeWork has just faced that challenges,” Son said in a statement. “Because the dream remains unchanged, SoftBank agreed to double the business by offering significant capital injection and organizational support.”

In recent years, with SoftBank’s massive Vision Fund, Son has become an even bigger player in tech investment, making huge transactions that no one else can equal. This new equity infusion shows a degree of faith in WeWork’s long-term prospects that would take Son out of line with the broader investment community; WeWork was forced to cancel its IPO after investors scrapped the details in their S-1 filing.

Last month, after investors challenged its large losses, the viability of its business model, and how it was managed by Neumann, who gave up his CEO role last month, WeWork postponed its initial public offering. He retained his position as We Company’s chairman.

Marcelo Claure, Chief Operating Officer of SoftBank, will succeed Neumann and become the Executive Chairman of The We Group.

“The new capital provided by SoftBank will restore momentum for the business and I’m committed to delivering profitability and positive free cash flow,” said Claure in a statement.

Artie Minson, previously the Chief Financial Officer of WeWork, and Sebastian Gunningham, who was the company’s vice chairman, are now serving as co-chief executives of the company.

SoftBank will own approximately 80 percent of the We Company after the closing and tender offer, according to a statement.

Yet, due to the complex ownership structure of WeWork, SoftBank will not currently hold a majority of voting rights at any stockholder or board of directors meeting. Therefore, WeWork is not a subsidiary, but an “associate” of SoftBank, even with its 80% stake in the business.