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WeWork valued at less than the money invested in it under SoftBank rescue plan

Laurence Dodds
WeWork in happier times, attending the opening ceremony of the Nasdaq stock exchange in New York City, 2018 - AP

WeWork will be valued at less than all the cash that investors have already poured into it under a rescue plan being put together by its biggest backer SoftBank, according to reports.

The Japanese tech conglomerate is said to be building an emergency funding package that would value WeWork at below $8bn (£6.2bn), an extraordinary decline from the $47bn it was supposedly worth in January.

It would also be less than the $10.6bn of investment raised by WeWork to date, according to data from Pitchbook, meaning that the crisis-stricken co-working company may actually have destroyed up to $5bn in wealth.

It is one of two competing rescue packages, the other being a $5bn debt deal organised by JP Morgan Chase which would involve issuing bonds with a painful 15pc yield rate, more than twice that of WeWork's last bond offering in 2018.

Details of SoftBank's latest offer were reported by Bloomberg. The negotiations are still ongoing and the final package, and valuation, might be different.

A spokeswoman for WeWork declined to comment. A spokesman for SoftBank did not respond to a request for comment.

WeWork is facing an urgent cash crunch after bottling its public float, in which it planned to raise as much as $4bn, as well as a debt facility of up to $6bn predicated on a successful market debut, to fuel its breakneck expansion. 

The company lost $900m in the first half of 2019 but only has around $2.5bn cash in hand. Further heavy spending means it could run out of money as early as next month.

“WeWork has retained a major Wall Street financial institution to arrange a financing,” said a spokesman earlier this week, saying around 60 potential funding sources had signed confidentially agreements and were meeting with WeWork and its bankers.

The crisis forced out WeWork's charismatic founder and chief executive Adam Neumann, who had led the company from one building in New York City to 528 locations in 111 cities, but alarmed some allies and observers with his complicated financial dealings and his reported integration of Jewish mysticism into business decisions. 

Any deal with SoftBank would probably give the Japanese conglomerate more power over its protege, diminishing Mr Neumann's voting power and building on its existing one-third stake.