SoftBank to take control of WeWork: Sources

It&#x27;s very difficult to see how SoftBank breaks even on this new deal. They&#x27;re investing $5bn now, with the hope that it&#x27;s worth more than that when they IPO, but several things have killed that idea. Firstly, their brand is tarnished. Secondly, the growth play will be gone by the time they IPO. Thirdly, the charismatic leader is gone, so the message of &quot;Disrupting&quot; and &quot;We&#x27;re a tech play&#x27; is gone. They&#x27;ve put $5bn into a company that&#x27;s roughly the same size as a public company that&#x27;s got a $4Bn market cap, but only got 70% equity as a result.<p>I think I&#x27;m at the point where I think that Softbank is throwing billions into wework to save face. That is a very bad move.

Better article in [1]. From the unconfirmed report:<p>- SoftBank to invest $4-5 billion<p>- Pre-money valuation at $7.5-8 billion<p>- SoftBank will end the deal with ~70% control of WeWork<p>- SoftBank&#x27;s Marcelo Claure to take over as chairman of We<p>- No confirmed word on additional job cuts, asset sales, or clawbacks from Neumann<p>[1] <a href="https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;10&#x2F;21&#x2F;softbank-to-take-control-of-wework-sources.html" rel="nofollow">https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;10&#x2F;21&#x2F;softbank-to-take-control-of-...</a>

I can actually see this working out. Comparing the first half of 2018 to the first half of 2019, WeWork roughly doubled revenue while keeping losses constant. Their losses went from ~2x revenue to ~1x revenue, which is still nuts, but improving quickly. They also had $1.5 billion in revenue through 2 quarters, and are growing at roughly 100% year over year.<p>If SoftBank can really reign in spending, in 2 years we could be looking at a company that’s cashflow neutral, growing very quickly, with annual revenue in the range of $5-10 billion. From the outside looking in, this seems possible to me, and would result in a company with a valuation much higher than $8 billion.

This has to be tough for all of the WeWork employees who were paper millionaires and now have stock options that likely won&#x27;t survive all of SoftBank&#x27;s preferences when and if WeWork finally IPOs.

Actually SoftBank is getting a good deal, using $5B to get a controlling interest of WeWork at 70%, wiping out all the commons and other LP&#x27;s. If they can cut out the slacks and focus on the core value proposition, WeWork can work after 4 to 5 years. The WeWork brand is unique and valuable.<p>They did that to Priceline in the past. Priceline was almost dead at one point. Got sold at a fire sales. They hunkered down and executed, and look where they are now.

Other news sources are reporting that Adam Neuman will be paid $200m to resign from the board of directors... just, wow.

Serious question: given the monstrous scale of softbank, the not so great quality of many of its holdings, and it&#x27;s ties into multiple world economies, could softbank be a systemic risk to the entire world economy?<p>If Uber took a big write off at this point, not only would American and Japanese companies and Saudi Arabia take major losses but I would imagine big tech stocks in general would start to see a loss in confidence and a reversion to more normal P&#x2F;E ratios.<p>I would imagine at that point softbank would be such a dirty word that it would have to firesale as well. And certainly no second vision fund.<p>And then you could go on and on about what would happen to pensions in the states and the rest of our systemically daisy chained over leveraged economy or whatever else if that happened.<p>Do I have an overly active imagination? Does anyone else worry about this kind of stuff?

This is your annual reminder that Masa Son once lost $70B

Lots of voices ignoring how Son holds onto stakes. He has yet to liquidate his Yahoo Japan and Alibaba Holdings, and those were massive wins. An embarrassing mistake like WeWork is sure to stay on the books for decades. Selling would force him to mark down the private loss, so more so than winner he will hold I expect.<p>Maybe WeWork can turn cash flow positive, in which case Don can easily justify holding it. So long as he is not forced to mark down then we can continue doubling down. Son is not a guy with an exit plan, he doubles down until bust then waits for the next cycle.

I don&#x27;t really get the ongoing obsession with We&#x2F;Softbank. I kind of got the whole schadenfreude side of it when it all came tumbling down but now it&#x27;s just turned into a story of a big company trying to dig itself out of a hole created by some dumb decisions it made.<p>Is there some larger relevance that I&#x27;m missing?

The thing that&#x27;s ironic is that the IPO market likely would have valued WeWork at $10B, maybe even $15B, but since that was so much lower than the $47B valuation it had during SoftBank&#x27;s earlier investment, they balked and walked.<p>SoftBank likely would have made out better in the near term had they just let the (disappointing, to them) IPO play out. WeWork would have launched with at least a $10B market cap (though of course that could have dropped on day one), would have raised a couple billion, and maybe would have even raised enough to meet the requirements for the loans they were planning on taking out. But now they&#x27;ve more or less gutted the company, killing anything that was even slightly interesting, turning it more or less into a bog-standard office real estate company. Which presumably will be able to turn a profit after a bit of retooling, but it hardly qualifies as &quot;Vision Fund&quot; material.<p>This is definitely just Son and SoftBank trying to save face.

So Softbank will have invested nearly $16Bn (10.5 already + 5 now) in something that even they think is only worth $8Bn? Am I reading this correctly because that makes no sense whatsoever. Except for Neumann who walks away with his $700Mn regardless!

In the last 4-5 years, Softbank basically caused hyperinflation in the startup world.

Does this mean then all the common are wiped out due to the liq preference that existed before?

Wow, that might be a record, IPO to cramdown in 3 weeks. I wonder if Softbank sees some way to convert some of the real estate into assets that it can sell off before the next recession hits to get its money back. I could not find a single thing in that article that suggested anything other than a liquidation that might favor the investors over creditors.

There doesn’t seem to be any original reporting in this article. The link should probably be: <a href="https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;10&#x2F;21&#x2F;softbank-to-take-control-of-wework-sources.html" rel="nofollow">https:&#x2F;&#x2F;www.cnbc.com&#x2F;2019&#x2F;10&#x2F;21&#x2F;softbank-to-take-control-of-...</a>

Let’s be honest.<p>Wework is good business if they can become cash positive. They have a brand, more and more people are going remote, there is a bug market for pricey and google-like coworking spaces.<p>It doesn’t matter if they had a bad CEO, or if they can’t IPO anymore, there’s no reason this wouldn’t become massively profitable in the next 10 years.

I guess Adam will get those margin calls on his $700m in loans on WeWork shares after all. Hope he can cover. <a href="https:&#x2F;&#x2F;www.ft.com&#x2F;content&#x2F;a9254a70-f1a8-11e9-bfa4-b25f11f42901" rel="nofollow">https:&#x2F;&#x2F;www.ft.com&#x2F;content&#x2F;a9254a70-f1a8-11e9-bfa4-b25f11f42...</a>

Does softback have strong financiers that can wrestle control over the companies expenditure and balance sheet? Given some of its recent investments at lofty valuations I don&#x27;t think so. If they can close this gap then I think a turnaround is possible over time. The brand will recover.

Wow, what a fall from grace. Weren&#x27;t they valued at 72 billion earlier?

So is this effectively a triggering of the partial ratchet noted in the S-1 (i.e. SoftBank gets shares if valuation falls)? Or a whole new deal?

Lol at the title. Imagine citing &quot;Sources&quot; in a paper. If you can&#x27;t state your sources, just leave out the citation.

how on earth does a company go from getting ready to IPO to being cash-strapped and needing an infusion in such a short space of time?<p>Never saw the numbers in the prospectus, but surely there was some indication?

I wonder what is going to happen to the wavepool company.

So who exactly came to the conclusion that they were worth &gt;40B just a few weeks before? How does that math even hold up?

I keep reading about that real estate company - make up your minds is it a tech company or not?