SoftBank to Face Tough Times Ahead as WeWork Delays IPO
WeWork, the largest investment of SoftBank, recently faced tribulations in releasing its shares as many of its investors posed serious questions over the companies’ worth and its corporate governance.
People familiar with the matter claim that the company has planned to postpone the offering at least till next month. Earlier, the Initial Public Offering (IPO) was to be done on Monday.
The recent move is a clear indication of the troubles faced by the firm to get the offering off the ground despite witnessing a dramatic plunge in its valuation and overhauling its governance.
Investors remained skeptical about the sustainability of WeWork’s business model that largely depends on a mix of long-term liabilities and short-term revenue. Direct questions were raised as to how will the new model brought forth by this US office-sharing startup avoid an economic downturn.
Referring to the recent change, WeWork said that all the modifications are being done “in response to market feedback”. It stated that the superior voting shares with co-founder Adam Neumann will witness a fall from exiting 20 to 10, even then he will continue to have a major control of the company.
As per sources, Neumann will share all the profits he receives from real estate deals between him and the firm. Further, he will only be selling 10 percent of his stock in the second and third years of the IPO.
WeWork recently announced that it will search for Neuman’s successor should he ever become permanently disabled or deceased. This eliminates the possibility of Rebekah, Neuman’s wife heading the firm.
WeWork is closely linked to founder Neumann who emphasises that the company’s mission is “to elevate the world’s consciousness”. Currently, Rebekah Neumann is the Chief Brand Officer of the firm.
As reported by the Financial Times, in case WeWork doesn’t go public, it will lose access to a loan worth $6 billion from multiple banks. Also, the firm would not be able to get new capital close to $4 billion, which it planned to raise through offering.
WeWork has huge goals to be pursued in near future which includes elevating world’s consciousness. In order to pay bills, the firm needs investor financing. In the balance sheet that came out on June 30, the firm listed $2.5 billion in cash and cash equivalents.
As per sources, after the shares of Uber fell, The Vision Fund had lost nearly $600m on its investment in Uber.
Aggravating existing tensions, another investment made in Slack, a workplace chat-app has not performed well. After going public in June, the shares of the firm dropped by 30 percent.
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