The fate of WeWork is about to be decided.
The embattled coworking space operator is said to be weighing last-ditch financing options this week to avoid running out of money after a disastrous attempt at an IPO.
WeWork’s parent company, The We Company, appears to be considering at least two possible financial lifelines.
One option would see Japanese tech company SoftBank (SFTBF) lend $5 billion to the company, and accelerate a $1.5 billion equity investment originally due to WeWork next year, a person familiar with the matter said. That option was first reported by The Wall Street Journal, CNBC and other outlets.
SoftBank, which is already The We Company’s largest investor, is also offering to buy up to $3 billion of stock from existing investors and shareholders. That would boost SoftBank’s ownership of the beleaguered startup to between 60-80%, depending on the amount of shares tendered, the person said.
SoftBank and its Vision Fund own a combined stake in The We Company of between 27% and 29%, according to brokerage firms CLSA and Bernstein Research.
WeWork’s potential valuation would drop to between $7.5 billion and $8 billion, the person said. That’s well below its peak of $47 billion.
Just as staggering: It would mean that at the new expected valuation, SoftBank would have put more money into WeWork to date than the company is worth.
Another option involves JPMorgan Chase offering a loan package from a group of outside investors, according to the Wall Street Journal. JPMorgan served as lead underwriter on The We Company’s botched IPO.
The decision could be announced as soon as Tuesday, according to multiple reports.
WeWork declined to comment. SoftBank also declined to comment. JPMorgan did not immediately respond to a request for comment.
The countdown to this pivotal moment caps off a dramatic two-month period for The We Company. After filing paperwork for a highly anticipated IPO in August, the company faced a barrage of criticisms for how it operated: It had staggering losses, no women on its board and CEO Adam Neumann had unchecked power and numerous potential conflicts of interest.
Neumann ultimately stepped down as CEO amid reports that investors, including SoftBank, wanted to oust him. He remains non-executive chairman, but no longer has majority voting control. While the We Company revised its paperwork to appease investors, it was too little, too late. The company was forced to postpone its IPO last month.
Since then, The We Company is said to be focused on belt-tightening. Several of the startups it acquired are reportedly for sale. It is reportedly gearing up for mass layoffs. The company also said it would cease operating its school, WeGrow, after this school year.
If that’s not enough, some of WeWork’s popular phone booths were pulled out of some rental offices due to “potentially elevated levels of formaldehyde.”