SoftBank doubles down to save WeWork

SoftBank Group Corp agreed to spend more than US$10 billion to take over WeWork, doubling down on an ill-fated investment and paying off its co-founder Adam Neumann to relinquish control, people familiar with the matter said on Tuesday.

The deal represents a stunning reversal of fortune for the US office-space sharing startup, as well as its largest shareholder, SoftBank, which with the latest commitments will have spent more than US$19 billion on a company that is now valued at just US$8 billion.

The setback 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 US$108 billion.

To stem WeWork’s bleeding, SoftBank will need to reverse its widening losses and find a way to make it profitable.

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 chief executive after attaining a US$47 billion valuation for it in January.

While WeWork employees now face the prospect of thousands of layoffs, Neumann has secured a US$685 million side deal with SoftBank to step down from the board of WeWork’s owner, The We Company, according to the sources.

Neumann faced margins calls on his personal borrowings against WeWork’s private stock as a result of the collapse of the company’s valuation. SoftBank has agreed to give him US$500 million to refinance his personal loans, as well as pay him a US$185 million consulting fee, one of the sources said.

Neumann was negotiating stepping down from the board and would serve as an adviser on Monday.

SoftBank will provide US$5 billion in new money to WeWork in the form of debt, the sources said.