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SoftBank announces it will own 80% of WeWork and provide billions to keep it operating

Kelly Tyko, USA TODAY

SoftBank Group Corp. is taking control of WeWork and providing the office-space startup with billions to keep it operating.

In a press release Tuesday night, SoftBank and WeWork jointly announced the Japanese tech conglomerate will own 80% of WeWork and SoftBank chief operating officer Marcelo Claure will be appointed executive chairman of WeWork’s board of directors.

The funding includes $5 billion in new financing and the launching of a tender offer by SoftBank of up to $3 billion for existing shareholders. SoftBank also will be accelerating an existing commitment to fund $1.5 billion, according to the release.

“As important as the financial implications, this investment demonstrates our confidence in WeWork and its ability to continue to lead in disrupting the commercial real estate market by delivering flexible, collaborative and productive work environments to our customers,” Claure said in the release.

"The funding provides WeWork with significant liquidity to execute its business plan to accelerate the Company’s path to profitability and positive free cash flow," the release said. "WeWork will not be a subsidiary of SoftBank. WeWork will be an associate of SoftBank.”

WeWork co-founder Adam Neumann will become a board observer, the release said. The Wall Street Journal reported Tuesday that Neumann could get up to $1.7 billion to exit.

Masayoshi Son, chairman and CEO of SoftBank, said in the release his company decided to "double down" on WeWork with "significant capital infusion and operational support."

“SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution," Son said. "It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced."

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WeWork has been scrambling for cash since its attempt to enter the stock market floundered last month, a stunning fall from grace for a company that has until recently been considered one of the most highly valued start-ups in the U.S.

The deal throws WeWork a lifeline as it attempts to turn around a money-losing business model that had repelled potential Wall Street investors. But it comes at a steep cost for SoftBank, which already owns one-third of WeWork and has sunk $10 billion into the company.

Contributing: Associated Press

Follow USA TODAY reporter Kelly Tyko on Twitter: @KellyTyko

WeWork, which replaced its controversial chief executive last week, announced September 30, 2019 that it will withdraw a plan to go public but will revive an initial public offering down the road.

This article originally appeared on USA TODAY: WeWork lifeline: SoftBank announces it will take over WeWork