WeWork, the start-up once poised to become the year’s biggest and most eagerly anticipated initial public offerings before abruptly canceling its floatation plans, will be bailed out and taken over by SoftBank at a steeply discounted valuation.
With the office-sharing company nearly out of cash, The Wall Street Journal reported Tuesday morning that WeWork’s board approved the takeover. Softbank, the investment vehicle led by Japanese billionaire Masayoshi Son, will shell out between $4 billion and $5 billion in fresh funding.
The deal values WeWork near $8 billion — a staggering drop from the $47 billion once proffered by the company when it first filed to go public.
One of Silicon Valley’s highly coveted “unicorns” — a company valued over $1 billion — WeWork has suffered a stunning fall from grace in the weeks since it pulled its plans to go public late last month.
Buffeted by skepticism from investors and questions about its governance, the company — which has yet to turn a profit — is reportedly working with JPMorgan Chase (JPM) to arrange fresh capital as a cash crunch looms. According to The Journal’s reporting, the bank is fielding options that include bringing together outside investors, one of which is Japanese lender Mizuho Financial, according to Reuters.
In September, S&P Global downgraded WeWork’s credit rating, citing doubts about the company’s ability to “meet its capital investment funding needs and liquidity covenant over the next 12 months,” the firm said in its action.
“Underpinning these uncertainties are challenging market conditions including a heightened risk of recession in the U.S., Brexit worries, and a slowdown of the Chinese economy (both London and China are major markets for The We Company),” S&P added.
The WSJ reported that WeWork’s co-founder Adam Neumann — who was ousted earlier this month — would see his role in the company further diminished in a SoftBank-led bailout. SoftBank may purchase some of his stake and would curtail his voting rights, sources told the publication.
Representatives for WeWork and SoftBank did not immediately return Yahoo Finance’s request for comment.
Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek