Japanese conglomerate SoftBank Group is preparing a takeover bid for WeWork, says The Wall Street Journal. The office management company, now the "poster child for start-up excess", is "bleeding cash and [being] shunned by mainstream investors". In exchange for injecting enough money into WeWork to relieve its "looming cash crunch", SoftBank would take control of it. The proposed deal would further sideline WeWork's controversial founder, Adam Neumann, who recently resigned as CEO but retains "substantial" voting power. SoftBank, which has already invested over $10bn in WeWork, reckons it "needs at least $3bn to get through the next year".
SoftBank may want to take over WeWork, but WeWork may have other ideas, says Bloomberg. In order to "avoid having their stakes severely diluted", Neumann and other major stakeholders are hoping that "emergency borrowing" can enable them to "turn around the office-sharing venture". WeWork's banker, JP Morgan, is "discreetly sounding out investors and floating" possible terms for a $5bn financing package that could prevent the loss-making group from "running out of money as soon as next month". The plans are "risky", but could reward investors "handsomely" if the firm does indeed recover.
Is it too late?
Even if WeWork manages to cling on, its business may be permanently damaged, says Dominic Rushe in The Guardian. After years of "breakneck growth", new openings have "all but stopped in WeWork's two largest markets, New York and London, as landlords worry about the company's future". Meanwhile, staff claim that the collapse of the planned initial public offering, and the 2,000 redundancies widely expected to be announced, has created a "toxic" atmosphere.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
It's not just WeWork's core business that is suffering, says The New York Times. For example, while it promised that its subsidiary WeLive, which runs managed apartments, "would become integral to the company's future", it only operates in two locations and is being investigated for illegally offering short-term hotel rooms. The education subsidiary WeGrow has also said that it will close its only for-profit school next year. Both offshoots have "become something of a metaphor for the entire company... big promises, but lacklustre results".
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
SIPP holders to get cash warnings and be offered default funds
News Providers will be required to offer investors a default fund and must warn customers of the inflationary risk of cash savings the regulator has said. What the new rules mean for your retirement pot?
By Marc Shoffman Published
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
By Marc Shoffman Published