Things are seemingly going from bad to worse for WeWork and its now ousted founder Adam Neumann. Having suffered a turbulent 2019 in which its valuation was repeatedly slashed and its IPO plans were shelved, 2020 has thus far provided no respite for the co-working space provider.
The Japanese SoftBank, which through its Saudi-backed Vision fund has been one of the start-up’s primary investors, has now pulled out of a planned $3bn (£2.4bn, €2.8bn) share offer.
The major tech investor maintained that it could no longer go through with its move to take control of WeWork given its duty to shareholders. It cited the company’s failure to restructure an important joint venture in China and the impact of the Covid-19 pandemic as factors in its decision.
SoftBank also alluded to the “multiple, new, and significant” pending criminal and civil investigations by authorities requesting information about WeWork’s financing activities and communication with investors.
Tacitly, Softbank may be relieved with these numerous concerns, as they have provided it with a legitimate and understandable way to exit from an investment which has already cost the firm more than $9bn.
Mayasoshi Son, the bank’s embattled CEO, has revealed the embarrassment he feels about his recent track record. Regarding WeWork’s founder Adam Neumann he admitted towards the end of 2019: “I shut my eyes to a lot of his negative aspects.”
The New York State Attorney General is currently examining the now-ousted Neumann, investigating whether he gave in to self-dealing to enrich himself. Regardless of how that investigation pans out, with Softbank abandoning its prior commitment Neumann will now lose the chance to sell as much $970m of his own share in WeWork.
This would be yet another blow for a man who, according to Bloomberg’s Billionaire Index, has seen his personal net wealth plunge by 97 per cent in the past year, from $14bn to around $450m.
SoftBank’s share price has plunged 21.53 per cent in 2020 thus far and closed down 0.96 per cent in Friday trading to stand at ¥3,732.