SoftBank May Bail On $3 Billion Of Its WeWork Bailout

SoftBank May Bail On $3 Billion Of Its WeWork Bailout
SoftBank Group CEO Masayoshi Son talking on WeWork’s financials, as represented here as a downward arrow with no data points, in November 2019. (Photo: Kazuhiro Nogi, AFP via Getty Images)

Japanese conglomerate SoftBank is trying to backpedal from part of its bailout of tanking coworking space firm WeWork, the Wall Street Journal reported on Tuesday, citing Department of Justice and Securities and Exchange Commission investigations into the latter company’s business practices.

According to the Journal, SoftBank sent a notice to WeWork investors that it might not actually have to purchase $US3 ($5) billion in shares from them—and that includes the $US970 ($1,618) million in stock held by former CEO slash possible brain worm vector Adam Neumann. Neumann was forced out of the company last year following a disastrously failed attempt at initial public offering and allegations of gross misconduct and mismanagement ranging from self-dealing to discrimination. SoftBank CEO Masayoshi Son has since more or less conceded that its investment in WeWork was a debacle.

The remaining $US5 ($8) billion of SoftBank’s WeWork bailout that has yet to be committed is unaffected, according to the Journal, and the investment giant didn’t actually say that the $US3 ($5) billion stock purchase was outright cancelled. SoftBank could instead be trying to negotiate a better deal for itself or simply trying to put off the purchase for as long as possible as markets have shot up and down (but mostly down) amid the ongoing outbreak of novel coronavirus, which has wiped trillions off global markets and sparked fears of a major recession.

Both CNBC and the Financial Times confirmed news that SoftBank sent the letter warning it could reverse course, with the Times noting that SoftBank’s value has plummeted 38 per cent in the last month alone. However, the paper consulted two lawyers “who have drafted similar agreements to the one that SoftBank signed with WeWork,” with both saying that it would be very difficult for SoftBank to renege on the agreement.

Before SoftBank’s valuation of WeWork collapsed from a ludicrous $US47 ($78) billion last year to just $US8 ($13) billion during the bailout, WeWork billed itself as a revolutionary tech company rather than a commercial real estate company, which it clearly is. That sector has been hard hit as millions of white collar workers switch to working from home, and particularly so as employers and employees alike may conclude continuing remote work policies after the crisis fades isn’t such a bad idea.