- SoftBank May Not Continue WeWork Bailout, Warned The Wall street journal this Tuesday.
- In a letter to WeWork shareholders, the Japanese investor explains that regulatory inquiries about the firm would push them not to continue with the $ 3 billion share buyback program.
- If SoftBank does not execute this part of the agreement, it would not affect the other part of the program, which finances $ 5 billion of debt. But WeWork CEO Adam Neumann would never sell his shares again.
- The news comes just at a time when the WeWork business will suffer greatly from the coronavirus pandemic, which is closing office buildings around the world.
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The Japanese investor has sent a letter to the firm’s shareholders explaining that they could withdraw from their $ 3 billion buyback agreement in WeWork shares because of the investigations the company is doing. Securities and Exchange Commission from the US Department of Justice.
WeWork and SoftBank spokespersons have avoided commenting. Representatives for Neumann, CEO of the company living in Israel, also did not respond.
In November, Bloomberg He advanced that the SEC was investigating whether WeWork breached financial rules before launching its public offering, which was eventually shelved. In December, in an audience with SEC President Jay Clayton, Senator Tom Cotton –who has already lashed out at the founder of WeWork in the past– questioned how the entrepreneur could exercise so much control over the company and wondered why the SEC had not intervened earlier.
The New York Attorney General also I was investigating the firm in the fall, to find out how Neumann had managed to enrich himself intertwining your personal and corporate investments.
An offer in jeopardy
The share buyback program was included in a package of measures that would allow Neumann, who resigned in September, sell $ 970 million of its stock portfolio to SoftBank. Under this plan, SoftBank would get 80% of WeWork after the program ended, with a deadline set with a deadline of April 1.
If SoftBank withdraws from the share buyback plan, this would not affect the financing of debt of 5 billion dollars that was included in the original program, details The Wall Street Journal. And SoftBank could use this in the offer, as a tactic to negotiate or to get deferrals.
This news reaches WeWork shareholders as the company, with its new CEO in charge, Sandeep Mathrani, will face deep economic challenges. The coronavirus pandemic is closing offices in cities around the world.
WeWork’s business model, which is largely based on short-term rental agreements, It has never been tested in a global recession scenario like this. IWG, the only similar contributor, has seen its shares fall in a month about 67%.
Last year, Neumann explained to Business Insider that WeWork would benefit from a recession, but Claims experts doubted it.
In a May article, Peel Hunt analyst Andrew Shepherd-Barron, who has been with IWG for 17 years, said the WeWork brand it would not help the company in a recession.
“If there is a problem in the market, watch out“
Alberto R. Aguiar,