WeWork, the company that is either a transformative way of life or a dangerously overleveraged real estate company posing as a cultish tech firm, is planning on laying off thousands of employees.
… Just as soon as it can scrape up the cash for severance costs, anyhow.
Earlier on Tuesday, reports indicated that WeWork investor SoftBank was preparing a $7 billion bailout package that may give it 70 per cent or higher control of the company at a valuation of $12 billion, a catastrophic fall from WeWork’s prior claims to be worth $69 billion. (As of just a few weeks ago, WeWork was still hoping for a valuation in the $29 billion range.)
Business Insider later reported that staff received emails indicating there will soon be layoffs at the company; according to another report from the Wall Street Journal, sources say that thousands of people are slated to lose jobs but that the decision had been delayed because WeWork has only “weeks” of money left and can’t afford to pay severance. The paper noted that SoftBank’s offer would cover buying “more than $US1 billion ($1.5 billion) of stock from existing investors and employees.”
In other words, WeWork is so broke that it needs to raise additional funds to fire people. As the Journal’s Liz Hoffman noted on Twitter, if the bailout package goes through, that will put SoftBank in the… unique position of having invested $15 billion and lent another $7 billion to a company it now values at $12 billion.
If a report on Axios is to be believed, around $292 million of that will be an exit package designed to wrest control of voting shares held by former CEO Adam Neumann, who stepped down amid claims of bizarre behaviour and a cloud of suspicion over questionable financial arrangements.
As CNBC reported, SoftBank isn’t the only one feeling the WeWork pain. Investor JPMorgan Chase, which was slated to rake in millions in fees for an advisory role in WeWork’s IPO and a financier role raising a $9 billion credit facility, could instead “collect nothing for months of work, along with potential hefty losses on its exiting equity and debt investments” if the competing SoftBank bailout goes through.