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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SoftBank attempted to delay WeWork’s $3 billion share purchase: Court filing – ET RealEstate

BOSTON | BENGALURU: SoftBank Group CEO Masayoshi Son told the executive he tasked to turn around WeWork after its botched initial public offering to “use whatever excuse” to delay a $3 billion payout to the office-sharing startup’s shareholders, a court transcript released on Wednesday showed.

The transcript, part of a Delaware court filing, provides new details on the decision by SoftBank to scrap a $3 billion tender offer to repurchase stock from existing shareholders, including founder Adam Neumann and employees.

A WeWork board committee that negotiated the tender offer sued SoftBank in April over that decision, accusing the Japanese company of “buyer’s remorse” amid the coronavirus outbreak.

The transcript includes an undated text exchange between Son and Marcelo Claure, who he installed as WeWork’s executive chairman last October.

Claure told Son that SoftBank Group Tokyo had “made a late request” to delay the tender offer payment until April 1, 2020 from Feb. 28, 2020.

Son replied: “It’s great to postpone the close of tender…. Use whatever excuse to make senses.”

Claure responded: “Ok. Will use antitrust. I am turning good at excuses like someone I know very well :)”

The court filing was made by Neumann and We Holdings LLC in an effort to compel SoftBank to produce documents they claim had been improperly withheld.

A SoftBank spokeswoman said in an email: “Cherry-picking quotes from documents doesn’t change the facts: under the terms of our agreement SoftBank had no obligation to complete the tender offer in which Mr. Neumann-the biggest beneficiary- sought to sell nearly $1 billion in stock.”

WeWork did not immediately respond to a request for comment.

SoftBank said earlier this year it would not complete the tender offer because several conditions had not been met.

Among the reasons it cited were U.S. criminal and civil investigations into WeWork, the failure to restructure a joint venture in China, and the pandemic.

SoftBank’s decision frustrated WeWork shareholders expecting a payout. Neumann, who was replaced as WeWork CEO last year, was to have sold the bulk of the shares.

The tender offer was part of a nearly $10 billion rescue package for WeWork negotiated last October and which gave SoftBank control of the company.

Since then, the pandemic has hurt WeWork’s occupancy rates, as corporate clients in big cities escape shared workspaces and ask employees to work from home.



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The We Company reverts to WeWork name – ET RealEstate

NEW YORK: The We Company, parent of money-losing shared office provider WeWork, which last year yanked plans to go public after harsh criticism over its business model and erratic management, is dropping the “we” moniker to revert to its better-known name, according to an internal memo seen by Reuters.

Restoration of WeWork as the official name is the most symbolic effort to date by management installed last year by majority owner SoftBank Group Corp to focus on its core office-sharing business.

The “we” brand was introduced in January 2019 by WeWork’s co-founder, Adam Neumann, with the aim of broadening the shared office space business to a lifestyle company.

Neumann was widely criticized when the company disclosed he had trademarked the brand and received a $5.9 million payment from WeWork for its use.

Neumann, who was replaced as chief executive and stepped off the WeWork board last year after the company abandoned plans to go public, later said he would return the money.

Sandeep Mathrani, the new CEO, said in the memo announcing the name change that the move is another step in returning the company to WeWork’s office-sharing roots.

“We want to be strategic. We want to be innovative. We want to be impactful. We want to be WeWork,” Mathrani wrote.

“We are officially restoring our company name from The We Company to WeWork,” the memo said.

WeWork, which has been slammed by the coronavirus-induced recession along with many other businesses, has said it will become profitable by the end of 2021.

The company hopes to benefit from corporations that are reducing their real estate footprint because of the pandemic and have looked to working from home and greater use of flexible workspace, which WeWork can provide with its global footprint.

Since Neumann’s exit Mathrani has hired new management and cut headcount in an effort to steer the company to profitability.

WeWork in August said it had slashed its cash burn rate to $482 million in the second quarter, or almost in half from the end of 2019. The company also said it had obtained a $1.1 billion commitment in new financing from SoftBank.

WeWork withdrew its public offering in September 2019 that looked to value the company at $47 billion and make it one of the year’s hottest IPOs.

WeWork soon entered a tailspin as its valuation fell to less than $8 billion. After a management shake-up it remains enmeshed in lawsuits over a $3 billion tender offer to existing shareholders.



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WeWork’s co-founder Miguel McKelvey to leave company – ET RealEstate

BENGALURU: WeWork‘s Miguel McKelvey, who co-founded the troubled office-sharing start-up with Adam Neumann, will leave the company at the end of June.

McKelvey’s exit comes at a time when the company’s core business faces an existential threat as the COVID-19 pandemic has forced its clients to stay away from WeWork offices, weighing heavily on its occupancy rates.

“After 10 years, I’ve made one of the most difficult decisions of my life … at the end of this month, I’ll be leaving WeWork,” said McKelvey through a company spokesman.

SoftBank-controlled WeWork is currently in the middle of executing a five-year turnaround plan and is shaking up its top management ranks under Executive Chairman Marcelo Claure.

Under Claure, who is also a SoftBank executive, WeWork has brought in several executives including CEO Sandeep Mathrani. A number of top executives who were part of the old guard at WeWork under Neumann, including co-CEOs Artie Minson and Sebastian Gunningham, have also left the company.

The office-sharing startup has gone through a tumultuous period since abandoning its initial public offering in September. It was forced to push out Neumann last year after SoftBank and other shareholders turned on him over his management style, his numerous conflicts of interest and his handling of the IPO.

SoftBank is also embroiled in a legal dispute with a special committee on WeWork’s board comprising two board members, Bruce Dunlevie and Lew Frankfort, after the Japanese company backed out of a $3-billion tender offer that was part of its bailout package for the startup.

The WeWork board last week appointed another special committee comprising new board members Alex Dimitrief and Frederick Arnold to decide on the validity of the previous special committee.

To date, SoftBank has invested more than $13.5 billion in WeWork.





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