Who hasn’t heard of the tumultuous times WeWork has been having? Ever since filing its IPO documentation, the company has been tumbling down a steep and slippery slope. Naturally, its downfall would have to impact the company’s backers, and SoftBank just happens to have been the biggest of them all.
Technically, they still are, especially after announcing that they are able and willing to bail them out. Previously, Celebrity Net Worth had reported that WeWork had less than 200 days to be in business.
By the media outlet’s calculations, the company would have been bankrupt within the first quarter of 2020, with the assumption having been that no cash influx would come their way.
Pumping in Some More
Luckily, SoftBank isn’t willing to give up on WeWork just yet, revealing that they’ll be pumping another $9.5 billion into the firm.
And while this move may be heaven for the real estate company, it hasn’t augured well for SoftBank. Soon after they made their announcement last week, the financial institution’s shares dropped by almost 3% on September 24.
To date, CNBC reports that SoftBank has spent at least $10.65 billion on WeWork, and that’s before including this new stream of cash they intend to pour into the company. This hefty amount effectively makes them the firm’s main backers.
Ever since the woes at WeWork surfaced, SoftBank has been feeling the heat. The company filed for an IPO on August 14, and since then, their backer’s shares have dropped a cumulative 18%.
As of October 21, SoftBank’s market cap was at $78.2 billion. The 3% drop was the lowest the shares have dropped since January this year.
No partnership is ever seamless, and the one between these two organizations has definitely hit lots of snags along the way. The silver lining, however, is that top executives in either seem to be on the same wavelength.
With the possibility of bankruptcy looming, WeWork’s board ultimately chose SoftBank as the financial institution that would bail them out, and there was no objection from them.
It also helps that some of these executives work for both organizations. Take WeWork’s Marcelo Claure, for example.
The company’s new chairman is also an executive at SoftBank, and is reported to have said that since the financial institution will be pumping in the cash, everyone at WeWork should now be ready to put the nightmare behind them.
According to him, they’ll have enough funds to turn things around.
Claure is taking over the reins from former chairman and CEO Adam Neumann who has been blamed for everything wrong that has been happening at WeWork. The thing with stepping down from such positions is that it never leaves you empty-handed, and Neumann will take home $1.7 billion for agreeing to resign.
Naturally, employees in the company feel that the payout is way too hefty a price, an issue that Claure has addressed head-on. As he explained, he sees the amount as an investment of sorts.
By “paying off” Neumann, they’ll be free to run the company however they see fit and without any interference from its founder.
Thinking about it, this is some smart thinking by the new chairman, especially after considering the voting rights Neumann had in the company.