WeWork reports quarterly loss of nearly $2.1 billion ahead of public listing – ET RealEstate

BENGALURU: SoftBank-backed office-sharing startup WeWork on Thursday reported a first-quarter net loss of $2.06 billion, as it was hit by restructuring charges while it prepares to go public through a merger with a blank-check firm.

WeWork said its business was recovering as more people returned to offices due to easing of COVID-19 curbs, after work-from-home arrangements last year weighed heavily on the company by reducing occupancy and increasing operating costs.

Total occupancy ticked up to 50% in the first quarter compared to 47% in the fourth quarter, the company said.

WeWork in March agreed to go public through a merger with BowX Acquisition Corp, a special purpose acquisition company, in a deal that valued it at $9 billion. SoftBank Group Corp said it would retain a majority stake in the company after the merger.

The company, whose attempt at an initial public offering in 2019 spectacularly imploded due to investor concerns over its business model and co-founder Adam Neumann‘s management style, said first-quarter revenue nearly halved to $598 million from a year ago.

WeWork said it had 490,000 members in the first quarter, compared to 693,000 in March 2020.

The company said it incurred restructuring costs of $494 million, driven by non-cash SoftBank stock purchases and a settlement with Neumann. It posted an impairment charge of $299 million partly due to an exit out of some real estate.

SoftBank and Neumann, WeWork’s former chief executive officer reached a settlement in February ending a legal battle that started in 2019 when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann and other employees, but later contested its obligation to purchase the shares.



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Adam Neumann’s final WeWork act: helping SoftBank’s SPAC deal – ET RealEstate

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BOSTON | BENGALURU: An unlikely figure helped set the spark for SoftBank Group Corp’s $9 billion deal to take WeWork public.

Adam Neumann, WeWork’s co-founder and ousted chief executive, met in November with the head of the special purpose acquisition company (SPAC) that would go on to clinch a deal with WeWork, according to people familiar with the matter.

Neumann was locked in a fierce legal battle at the time with SoftBank over a $3 billion deal for a portion of his and other investors’ stake in the office space-sharing company.

The introduction between Neumann and BowX Acquisition Corp co-chief executive Vivek Ranadive over a Zoom call was facilitated by a senior UBS Group AG capital markets banker, the sources said. It preceded discussions the SPAC chief had with WeWork.

Neumann played up WeWork’s prospects on the call and the conversation piqued Ranadive’s interest, the sources said.

Ranadive’s SPAC had been looking for an acquisition target after raising $420 million in an IPO in August.

The ensuing deal announced on Friday cushions some of the blow SoftBank has suffered with its investment in WeWork. It has invested at least $18.5 billion in WeWork since 2017, including $6 billion when a fundraising round valued the startup at $47 billion in January 2019.

The sources described the meeting between Neumann and Ranadive on condition of anonymity. Representatives for Neumann, WeWork, UBS and SoftBank declined to comment. Ranadive did not respond to multiple requests for comment.

Neumann, who has kept a low profile since his unceremonious ouster after WeWork’s failed IPO attempt in 2019, has had a contentious relationship with SoftBank.

The Japanese tech investment giant pushed for his ouster before it took over WeWork in a $10 billion rescue financing deal in October 2019. It later backtracked on an agreement to buy $3 billion of WeWork shares from Neumann and other investors, citing criminal and civil investigations into WeWork, the company’s failure to restructure a joint venture in China, and the shift to remote work due to the COVID-19 outbreak.

One week before the case was due to go to trial, SoftBank reached a settlement with Neumann and other investors in February to pay out about half of its original commitment. It did not want the potential legal liability to jeopardize the SPAC deal, the sources said.

Neumann also stands to benefit from the SPAC deal as he still has a roughly 10% stake in WeWork, worth around $790 million.

Limited options

Neumann had no role in the SPAC deal after his discussion with Ranadive, the sources said. Ranadive and his team began discussions with WeWork in December. SoftBank Chief Operating Officer and WeWork Executive Chairman Marcelo Claure led the negotiations on behalf of SoftBank, with SoftBank CEO Masayoshi Son also stepping in, one of the sources said.

WeWork was apprehensive about opting for a traditional IPO following its failed attempt in 2019, and its options for a SPAC deal were limited. BowX was the only SPAC that expressed a serious interest in WeWork, two of the sources said.

Ranadive, a 63-year-old technology executive turned investor and owner of the Sacramento Kings basketball team, said last week WeWork stood to benefit from a shift by many companies to a hybrid model of working that calls for employees to come in to a workplace just a few days a month.

He called the shift a tailwind for WeWork.

The deal was received well by Wall Street, with BowX shares ending trade on Friday up 20% following the merger’s announcement.

WeWork’s valuation was revised down in the final stages of the negotiations. Investors participating in the private investment in public equity (PIPE) transaction managed to drive down WeWork’s valuation in the agreement from $9.9 billion to $9 billion, including debt, the sources said. The size of the PIPE increased to $800 million from $500 million.

Ranadive and the rest of the BowX senior team will receive WeWork shares worth almost $90 million after investing $11.7 million of their own money. They will be restricted from selling these shares for the first year unless certain share price targets are met.



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SoftBank reaches settlement with former WeWork CEO Adam Neumann – ET RealEstate

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BENGALURU: SoftBank Group Corp said on Friday it has reached a settlement with WeWork‘s special committee and the company’s co-founder and former chief executive, Adam Neumann, putting to rest a legal battle dating back to 2019.

SoftBank, the new owner of the office-sharing firm, did not disclose terms of the settlement. Media reports earlier this week indicated the deal includes a nearly $500 million cut in Neumann’s payout from SoftBank.

The legal tussle between SoftBank and Neumann started in 2019, when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann as well as current and former WeWork employees. SoftBank later contested its obligation to purchase the shares.

Under the new settlement, SoftBank will purchase around half the shares it had originally agreed to buy, a source familiar with the talks had told Reuters on Monday.

The settlement is also expected to clear the decks for WeWork as it reportedly pursues a public listing by merging with a special purpose acquisition company (SPAC).

“This agreement is the result of all parties coming to the table for the sake of doing what is best for the future of WeWork,” said Marcelo Claure, executive chairman of WeWork and CEO of SoftBank Group International.

SoftBank, which poured more than $13.5 billion into WeWork, was pulled into the legal dispute with directors at WeWork after backing out of the $3 billion tender offer agreed when it bailed out the office-sharing firm following a flopped IPO attempt.



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WeWork aims to become profitable in 2021 globally: Sandeep Mathrani, CEO – ET RealEstate

NEW DELHI: Co-working major WeWork will focus on achieving profitable growth globally, including in India, in 2021 by increasing the occupancy level of its real estate portfolio, the company’s CEO Sandeep Mathrani said.

Further, Softbank backed-WeWork will revisit its plan to launch an initial public issue (IPO) only after it becomes profitable, said Mathrani, who became the new CEO in February after the exit of WeWork co-founder and former CEO Adam Neumann.

In a video conference, Mathrani said India is an important market for the US-based firm and has recently invested USD 100 million in WeWork India.

WeWork India’s contribution to global revenue is currently small but it will continue to rise as the country has great potential for flexible workspace business, Mathrani said.

Asked about WeWork’s top priorities for India, he said the global strategy is to achieve profitable growth through increase in occupancy level at all its centres.

“Our priority everywhere globally is profitable growth and streamlining our organisation and real estate portfolio in 2020,” he said, adding that in 2021, the company plans go towards having profitable growth and become EBIDTA positive.

Mathrani said the company has been able to reduce operating cost and cash burn significantly this year by streamlining the organisation and also its real estate portfolio.

The exercise of right-sizing organisations has been completed, while the streamlining of real estate portfolio is also 75 per cent complete, he added.

Mathrani said 65-70 per cent occupancy level is required for break even, which the company had achieved before the outbreak of COVID-19.

He noted that the pandemic has highlighted the importance of de-densification of office space and adoption of hub and spoke model.

He felt that India would benefit from this because of cost advantage.

Mathrani described the WeWork global investment of USD 100 million as a “strategic move” that shows its commitment to the Indian market. He mentioned that WeWork has sold its investment in its China business.

Asked whether the company has any plan to relaunch its public offer, Mathrani said the company is currently targeting to achieve profitable growth and positive cash flow, and then will decide the path forward.

“I am a big believer of we take one step at a time, we show profitable growth and then decide what the path forward is. Get to the cash flow positive and then decide,” Mathrani said.

In September 2019, WeWork had withdrawn its public issue that sought to value the company at USD 47 billion. The valuation reportedly dropped to less than USD 8 billion.

Karan Virwani, the CEO of WeWork India, said demand for flexible workspace has increased from large enterprises.

He said the share of large corporates in WeWork India centres has gone up to 67 per cent from 50 per cent but expressed confidence that small members would come back post pandemic.

WeWork India, which is owned by Bengaluru-based realty firm Embassy group, will not set up centres and then find clients, but it will prefer to take up clients and accordingly lease properties.

Virwani said the WeWork India has been able to reduce its cost by around Rs 250 crore.

WeWork India currently has 34 centres, comprising 60,000 desks and over 5 million sq ft area, in Bengaluru, Mumbai, Gurugram, Noida, Pune and Hyderabad.

Globally, WeWork has around 840 centres with 6.6 lakh membership.



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