(Reuters) - Hold ml
SoftBank Group agreed to spend more than $10 billion to take over WeWork on Tuesday, doubling down on an ill-fated investment and giving a near $1.7 billion payoff to the U.S. office-space sharing startup’s co-founder Adam Neumann to relinquish control.
The deal represents a stunning reversal of fortune for WeWork as well as its largest shareholder, SoftBank Group Corp, which has committed more than $13 billion in equity to a company that is now valued at just $8 billion.
The bailout comes as SoftBank Chief Executive Masayoshi Son is seeking to convince investors to participate in the Japanese company’s second mammoth Vision Fund, for which he is seeking to raise $108 billion.
To stem WeWork’s bleeding, SoftBank will need to reverse its widening losses and find a way to make it profitable.
Shares in SoftBank dropped 2.5% on Wednesday in Tokyo, while the cost of default protection on the firm has risen, with the 5-year credit default swap jumping 17.7 points in a week to the highest level since January.
The rescue financing also marks a dramatic fall from grace for Neumann, who as recently as last month was preparing to take WeWork public as CEO after attaining a $47 billion valuation for it in January.
While WeWork employees now face the prospect of thousands of layoffs, Neumann has secured a $685 million side deal with SoftBank to step down from the board of WeWork’s owner, The We Company, according to people familiar with the arrangement.
Neumann also has the right to sell $970 million of shares, according to one of the sources, as part of
