Softbank rescue package could value Wework at less than $8bn

WEWORK will be valued at less than all the cash that investors have already poured into it under a rescue plan being put together by its biggest backer, Softbank.

The Japanese tech conglomerate is said to be building an emergency funding package that would value Wework at below $8bn (£6.2bn) – an extraordinary decline from the $47bn it was supposedly worth in January. It would also be less than the $10.6bn of investment raised by Wework to date, according to data from Pitchbook, meaning that the crisis-stricken office rental group may have destroyed value of up to $5bn.

It is one of two competing rescue packages, the other being a $5bn debt deal organised by JP Morgan Chase that would involve issuing bonds with a painful 15pc yield – more than twice that of Wework’s last bond offering in 2018. Details of Softbank’s latest offer were first reported by Bloomberg. The negotiations are ongoing and the final package, and valuation, could differ.

A spokeswoman for Wework declined to comment. A spokesman for Softbank did not respond to a request for comment.

Wework is facing an urgent cash crunch after abandoning its listing that had aimed to raise as much as $4bn, as well as a debt facility of up to $6bn predicated on a successful market debut, to fuel its breakneck expansion.

The company spent $2.9bn in the first half of 2019 but only has about $2.5bn cash in hand, implying it could run out of money as early as next month.

“Wework has retained a major Wall Street financial institution to arrange a financing,” said a spokesman earlier this week, saying about 60 potential funding sources had signed confidentially agreements and were meeting with Wework and its bankers.

The crisis forced out Wework’s charismatic founder and chief executive Adam Neumann, who had led the company from one building in New York City to 528 locations in 111 cities.

However, he alarmed some allies and observers with his complicated financial dealings and his reported integration of Jewish mysticism into business decisions.

Any deal with Softbank would probably give the Japanese conglomerate more power over its protégé, diminishing Mr Neumann’s voting power and building on its existing one-third stake.