WeWork board accepts SoftBank rescue deal: source

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© Reuters. The WeWork logo is displayed outside of a co-working space in New York© Reuters. The WeWork logo is displayed outside of a co-working space in New York

(Reuters) – WeWork’s board has accepted a takeover plan proposed by SoftBank Group, handing control of the office-sharing startup to the Japanese firm, according to a source directly familiar with the matter.

WeWork owner The We Company’s board was evaluating SoftBank’s offer against an alternative financing proposal from JPMorgan Chase & Co (N:), but decided to go with SoftBank, even though the bank put together a $5-billion debt financing package.

This marks a stunning reversal of fortunes for WeWork, which has lost nearly $39 billion of its valuation over the past five weeks, during which it scrapped its hotly-anticipated public debut, ousted co-founder Adam Neumann as CEO and launched a cost-cut plan after starting to run out of cash.

Reuters reported on Monday that SoftBank had offered a package worth nearly $10 billion to WeWork and its shareholders under a plan that would keep the company afloat and lead to the exit of its Chairman Neumann.

SoftBank had offered $5 billion in new money to WeWork in the form of debt and had also proposed to accelerate a previous $1.5 billion equity commitment in the form of warrants due in April.

That commitment was made in January at a $47 billion valuation, but SoftBank’s latest rescue package is at a valuation of about $8 billion, according to the source.

The Wall Street Journal reported on Tuesday that under the deal agreed with the board, Neumann would be paid nearly $1.7 billion by SoftBank, funded by a new credit line and the sale of roughly $1 billion of his WeWork stock.

SoftBank and its $100 billion Vision Fund already own about a third of WeWork through previous investments totaling $10.6 billion.

WeWork did not immediately respond to request for comment.

WeWork abandoned the IPO in September when investors questioned its large losses, the sustainability of its business model and the way it was being run by Neumann, who gave up his CEO title last month.

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