SoftBank may bail out WeWork following voting right changes
Priya Wadhwa
10x Industry

SoftBank may bail out WeWork following voting right changes

WeWork could slash expected IPO valuation by more than 50%.

In January this year, WeWork received a $47 billion valuation. However, since its IPO filing and financials becoming public knowledge, the cash burning unicorn has struggled with seeking a higher valuation at its upcoming IPO.

Moreover, the founder's unorthodox move of selling 700 million worth of shares prior to IPO did not incite the best confidence in the company's future.

International media reports suggest the company could be looking to get an IPO valuation of less than $20 billion. Reuters reported this could be as low as $10-12 billion.

Investors have been skeptical of WeWork as the company's financials show losses at par with revenues, leading to lowered demand and valuation.

SoftBank has the largest share in the real estate unicorn. It has injected $10 billion in the company including $2 billion in the latest round.

It also stands to lose big — as much as 42-56.5% of value in WeWork with the ways things are going.

Now there are reports that SoftBank would buy at least $750 million worth of shares in an attempt to boost the valuation to $15-20 billion and raise at least $3 billion at the IPO.

With this injection, it would hold more than 25 percent of the company's shares.

This move will follow the change of voting rights of the co-founders of WeWork and major governance changes, as detailed on the regulatory filing.

Here are the top three changes:

  1. Adam Neumann has reduced voting rights from 20 to 10 votes per share, which was a reversal to the recent increase in voting power. Moreover, even though he still retains maximum voting rights of the company, the board now has the power to remove him from his position of the CEO.

  2. In addition, the right of his wife and co-founder Rebekah Neumann, to chose Adam's successor should he die or be permanently disabled in the next 10 years, was removed.

  3. Adam Neumann will not be able to sell more than 10% of his stake in the company in the second and third years from the IPO. Previously he had pledged this to be one year.

This could be seen as a win for public investors, however will it bring back the trust in Neumann and his board to keep a check on founder's powers?

Neumann believes nothing major will change in the workings of WeWork, but that he is looking for a huge influx of cash to keep on with his expansion plans.

At this point, the situation is still fickle with sceptical investor demand. The We Company has plans to market its shares to investors starting this week, ahead of the trading debut week starting on 23 September. The IPO price range is expected to be set by next week too.