By Niket Nishant and Anirban Sen
NEW YORK, Nov 7 (Reuters) - SoftBank Group Corp
, the Japanese conglomerate led by Masayoshi Son, invested about $16 billion in WeWork in the years that led up to the flexible-workspace company's bankruptcy, according to Reuters calculations.
The spectacular implosion of WeWork, which has inspired books, podcasts and a TV show, were among the most expensive SoftBank bets that soured after the firm raised Vision Fund 1 (VF1) - a $100 billion investment fund it raised in 2017 with the backing of outside investors - and blotted Son's reputation as a savvy investor. In 2019, SoftBank launched Vision Fund 2 with its own capital.
Since SoftBank first wrote a $4.4 billion check to WeWork in early 2017, the Japanese conglomerate invested nearly $12 billion more of equity and debt in WeWork through its various entities, including its Vision Funds, according to regulatory filings, press releases and data analyzed by Reuters.
SoftBank's bet on WeWork started to unwind at the time of its highly-anticipated initial public offering $(IPO.UK)$ in 2019 when the company was being courted by Wall Street's top investment banks, many of whom had pitched SoftBank and WeWork astronomical valuations at the time.
By October that year, WeWork's IPO had been abandoned and the company found itself on the brink of going under water, forcing SoftBank to put together a rescue financing package of $9.5 billion, including a $5 billion debt package, to bail out the company. The deal valued WeWork at $8 billion at the time.
Son later publicly admitted that he overestimated WeWork and its co-founder Adam Neumann, whose erratic management style, combined with WeWork’s lack of a clear path to profitability, alienated potential IPO investors. Neumann quit as CEO in 2019, bowing to pressure from some investors.
WeWork subsequently went public through a deal with a special purpose acquisition company (SPAC) in 2021 that valued the company at $9 billion. However, even after it hired new management in 2020, SoftBank struggled to turn WeWork's fortunes around, despite the company's efforts to drastically cut costs, shutter money-losing locations, and sign new clients.
SoftBank had a credit support deal with WeWork worth $1.1 billion as of end-June.
Below is a summary of SoftBank's key investments in WeWork.
DATE OF SOFTBANK'S BETS ON WEWORK
INVESTMENT
Aug 2017 SoftBank makes its first investment in
WeWork, investing $4.4 billion in the
company.
Jan 2019 WeWork raises an additional $2 billion
from SoftBank. Reaches peak valuation of
$47 billion.
Aug 2019 WeWork files for IPO. Discloses losses
of $1.9 billion for 2018.
Sept 2019 Co-founder Neumann agrees to step down
as CEO, after pressure from biggest
investors worried about WeWork's future
prospects.
Sept 2019 WeWork withdraws IPO filing.
Oct 2019 SoftBank puts together $9.5 billion
rescue package to bail out WeWork. As
part of deal, Neumann was set to
receive$1.7 billion to relinquish
control. SoftBank COO Marcelo Claure
named WeWork's executive chairman.
Nov 2019 Son admits lapse in judgment on WeWork
investment, tells investors that
WeWork's failure was "a very harsh
lesson.”
April 2020 SoftBank pulls $3 billion tender offer
for additional WeWork shares, saying
several pre-conditions had not been met.
April 2020 WeWork sues SoftBank for pulling the
tender offer.
May 2020 Neumann files a lawsuit against SoftBank
for backing out of the deal.
Feb 2021 SoftBank reaches a settlement with
WeWork’s special committee and with
Neumann, agrees to buy half the shares
it had originally said it would buy.
March 2021 WeWork agrees to go public through a
SPAC deal that valued the company at $9
billion.
Oct 2021 WeWork starts trading on the NYSE.
Nov 2023 WeWork files for bankruptcy.
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(Reporting by Anirban Sen in New York and Niket Nishant in Bengaluru; Editing by Aurora Ellis)
((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters Messaging: Signal/Telegram/Whatsapp - +1-646-705-9409))
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