Business / Corporate

SoftBank launches $3 billion tender offer for WeWork shares

Bloomberg, Reuters

SoftBank Group Corp. has launched a long-awaited $3 billion tender offer for WeWork stock, according to sources.

The offer expires April 1, said one of the sources, who requested anonymity because the matter is private. Representatives for SoftBank and WeWork declined to comment.

WeWork parent We Co. agreed to the tender offer from the Japanese conglomerate last month, one element of a $9.5 billion rescue package for the ailing office-sharing company.

As part of SoftBank’s proposal to buy existing shares, WeWork co-founder Adam Neumann is entitled to sell as much as $970 million worth of his stock.

The bailout package — which also included millions of dollars in other payouts for Neumann as he exited the company — came as WeWork teetered on the brink of insolvency.

The favorable terms for Neumann angered some employees, many of whom are facing job cuts as the company turns its focus to profitability. Last week, WeWork said layoffs would affect 2,400 employees around the world, or almost 20 percent of its workforce.

Executives at SoftBank had been discussing a way to alter or shrink its offer, though it was unclear how they would renege on the agreement, it was learned last week. The tender offer launch is about three weeks behind its targeted kickoff, which was five business days after an accelerated $1.5 billion equity injection on Oct. 30.

Besides the new equity injection and the tender offer, SoftBank’s rescue package also includes about $5 billion in new debt financing. If the tender offer is completed to capacity, it will hand SoftBank almost 80 percent of WeWork, which is now valued at about $8 billion.

Any repriced stock options for current and recently fired employees won’t be eligible for the tender offer, a person with knowledge of the matter said last week.

After being valued at $47 billion in January and planning an initial public offering, WeWork quickly became a company that was facing a cash crunch and fighting for survival. It shelved its plans for the IPO on Sept. 30 because investors were wary of its growing losses, its business model and its corporate governance. Neumann had resigned as CEO.

Marcelo Claure, the new executive chairman of WeWork’s parent, told WeWork employees last month he had “no idea” how many shares Neumann was going to sell in the tender.

Neumann has more than a 20 percent stake in WeWork, but his real power came from supervoting stock that gave him control. His ability to use supervoting stock will disappear as part of the deal with SoftBank.

The size of Neumann’s potential payout at a time when the company is firing workers led U.S. Sen. Elizabeth Warren, who is among the contenders seeking the Democratic presidential nomination in 2020, to tweet on Friday that “this is another example of a rigged and corrupt system.”

A spokeswoman for Neumann declined to comment.