Softbank cancels Wework tender
TOKYO: Softbank Group Corporation said it has terminated a $3 billion tender offer for additional Wework shares agreed last year with shareholders, drawing threats of legal action and plunging the floundering office space company further into crisis.
The tech investment giant said in statement that given its duty to its shareholders it could no longer proceed with the deal, citing criminal and civil probes into the startup, Wework’s failure to restructure a joint venture in China and the impact of the coronavirus pandemic.
A special committee of Wework’s board said it was disappointed and is considering “all of its legal options, including litigation.”
Softbank’s decision to rescind the offer means the Japanese firm is no longer obligated to proceed with a further $1.1 billion in debt financing for Wework. It also underscores the depth of the disarray at Wework, which is undergoing a drastic restructuring and whose earnings are at risk as many countries impose orders to stay at home due to the pandemic.
“Wework is in real trouble and Softbank’s withdrawal from the share purchase worsens the situation materially,” Richard Windsor, an independent analyst, wrote in a note.
The startup, which lost $1.25 billion in the third quarter, told investors last week that it had $4.4 billion in cash and cash commitments and would be able to weather the economic downturn.
The tender offer, which would have mostly benefited a select group of shareholders including ousted co-founder Adam Neumann, had been agreed in October as part of bailout plan by Softbank after Wework’s IPO plans flopped. Investors had been concerned about its losses and a business model that involves taking long-term leases and renting out spaces for a short term.