WeWork in crisis as SoftBank terminates its £2.41 billion tender offer

WeWork in crisis as SoftBank terminates its £2.41 billion tender offer
Written by:
Wajeeh Khan
April 2, 2020
  • SoftBank refuses to purchase £2.41 billion worth of additional WeWork shares.
  • WeWork's special committee says it will consider litigation against SoftBank.
  • The office-sharing company highlights £3.54 billion in cash to withstand COVID-19.

In its statement on Thursday, SoftBank Group Corp (TYO:9984) announced to have terminated its tender offer worth £2.41 billion directed at purchasing WeWork’s additional shares. The deal was originally agreed with shareholders in 2019 after WeWork’s IPO (Initial Public Offering) failed. The recent move threatens litigation against SoftBank and expands the financial crisis for the office-sharing company.  

The Japanese multinational conglomerate holding company referred to the ongoing civil and criminal probes against WeWork for its decision that it said was targeted at protecting its shareholders. The tech investment firm also attributed the move to the Coronavirus driven economic challenges, and the startup’s failure in China concerning the restructuring of its joint venture.   

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WeWork To Consider Litigation Against SoftBank

WeWork’s special committee responded to the news and expressed its disappointment in SoftBank’s decision. The committee also said that it wishes to explore all legal options at its disposal including litigation.

The repercussions of SoftBank’s announcement on Thursday include WeWork losing £880 million in debt financing from the Japanese company. It also pushes the American commercial real estate company further into crisis and jeopardizes its earnings as countries resort to nationwide lockdowns to minimize the fast spread of the flu-like virus. WeWork is also currently engaged in drastic restructuring.

In Q3, the office-sharing company had posted a massive £1 billion in loss. Addressing to its investors, the company recently highlighted £3.54 billion in cash that it said was sufficient to withstand the economic blow of the ongoing health emergency.

SoftBank also highlighted on Thursday that it doesn’t wish to be a part of the rising civil and criminal investigations that are also scrutinizing WeWork’s financial activities and its overall dealing with investors.

SoftBank Closed 2.5% Up On Thursday

The Japanese firm itself is under financial pressure as a few of its recent tech bets turned sour. With two of the telecommunications companies on its portfolio, T-Mobile and Sprint, finalizing their merger on Wednesday, however, the investment company is expected to see significant gains in the current quarter.

SoftBank’s announcement was received positively in the stock market as it closed 2.5% up on Thursday versus a 1.4% decline that was noted in the wider Tokyo index .N225.

At £28.19 per share, SoftBank is still trading a little under 20% year to date. The Japanese conglomerate holding company is currently valued at around £58 billion.