SoftBank Group has withdrawn a $ 3 billion public offering for WeWork actions – citing closing conditions that are not met.
The investment giant was rumored to be cooling off, when the WSJ reported last month that it was using regulatory investigations as a way to reverse its commitment to buy $ 3BN in shares of current WeWork shareholders.
Under the terms of the share repurchase agreement negotiated last year, WeWork founder Adam Neumann was willing to receive nearly $ 1BN for his shares in the joint venture company. The former CEO had already been expelled at that stage after public markets opposed his managerial insight, as we reported at the time.
In a press release issued today, SoftBank SVP and legal director Rob Townsend writes:
SoftBank remains fully committed to WeWork's success and has taken significant steps to strengthen the company since October, including recently committed capital, developing a new strategic plan for WeWork, and hiring a new world-class management team. The public offering was an offer to buy shares directly from other major shareholders and its termination has no impact on WeWork's operations or customers. The closing of the public offering was conditioned on the satisfaction of certain closing conditions that the parties agreed on in October of last year for the protection of SoftBank. Several of those conditions were not met, so SoftBank had no choice but to end the public offering.
SoftBank lists the unfulfilled conditions that have led it to end the offer as:
- The inability to obtain the necessary antitrust approvals before April 1, 2020;
- Failure to sign and close the China joint venture roll-up before April 1, 2020;
- The failure to close the roll-up of the Asian joint venture (ex-China and ex-Japan) before April 1, 2020;
- The existence of multiple, new and significant pending civil and criminal investigations that have begun since the MTA was signed in October 2019, in which authorities have requested information on, among other things, WeWork's financial activities, communications with investors , business with Adam Neumann, operations and financial condition; Y
- The existence of multiple new actions by governments around the world related to COVID-19, which impose restrictions against WeWork and its operations.
A WeWork spokeswoman declined to comment on SoftBank withdrawing the offer. But Reuters reported that a special WeWork board committee said it was "disappointed" by the development and is considering "all its legal options, including litigation."
As of this writing, SoftBank had not responded to a request for comment.
His press release emphasizes that “Neumann, his family and certain large institutional shareholders, such as Benchmark Capital, were the parties that benefited the most from the public offering ”.
Together, the assets of Mr. Neumann and Benchmark make up more than half of the shares offered in the offering. By contrast, current WeWork employees offered less than 10 percent of the total, "he writes, adding:" SoftBank previously worked with WeWork to complete an earlier phase of the public offering that allowed more than 4,000 employees to change the price of the money stock options at lower exercise prices, delivering more than $ 140 million in value to these employees in the form of reduced exercise prices (where such options would have been worth substantially less or nothing without such revaluation) ”
Earlier this week, WeWork announced the sale of Meetup, a social media platform designed to connect people in person, for an undisclosed sum that is reportedly far less than the $ 156 million acquisition price. WeWork paid for it in 2017.
The novel coronavirus has certainly caused disruptions to the collaborative work business and hipster social media, as populations are encouraged to do the opposite of mixing. The short-term prospects for joint work spaces in a new era of social distancing and encouraged (or forced) domestic work appear bleak.
However, outside of Asia, WeWork has so far closed only a small minority of its locations worldwide as a result of the coronavirus pandemic.
Even in highly affected cities in Europe, such as Madrid. and Milan, where governments have imposed strict quarantine measures to try to stem the tide of COVID-19 deaths, WeWork has not taken the step of closing joint workspaces.
On the other hand, in Europe and the USA. In the USA, it has only been temporarily closing buildings or even just individual floors if infections are identified.
It is a different story in Asia. According to an updated list of building closings on the WeWork website, the company closed more than 30 locations in Indian cities on March 23, but only after the government imposed a three-week national closure, instructing 1,300 people from India to stay home.
Elsewhere, WeWork members can see little reason to interrupt quarantine to travel to a shared workspace when, as long as they have internet at home, they can stay where they are and be just as productive without risking spreading or contracting the virus, hence the Zoom video conferencing boom.
WeWork's handling of the coronavirus crisis has also caused some splits with its members, with press reports from members angered by refusing to reimburse for spaces they cannot (in good conscience) use.
It has also faced criticism from angry members because it is prioritizing rent collection as of now small businesses with very little money rather than closing during a public health crisis. (We have heard similar stories from members who did not want to be publicly identified.)
WeWork, meanwhile, has justified staying open in a pandemic by claiming that its locations contain people doing essential work.
When we asked the company about its response to the coronavirus last month, it told us: "We are closely monitoring the coronavirus pandemic (COVID-19) and have implemented a series of precautionary measures," saying that it had become stronger "in site cleanup measures "and suspended all internal and member events until further notice, effective March 12.
On the same date, he had offered his own staff the option to work from home, although his doors were still open to members who paid by card.