Earlier this week, SoftBank finalised an agreement to take over WeWork. As a part of the agreement, SoftBank would be providing about $5 billion in new funding. With this new agreement, SoftBank now has around 80% control of WeWork and Marcelo Claure, presently SoftBank’s Chief Operating Officer, has been appointed as the company’s Executive Chairman.
“we have to right-size the business”
Marcelo Claure,
Executive Chairman, WeWork
As a part of the turnaround strategy put in place by SoftBank, as reported by the Financial Times – WeWork will be letting go, nearly a third of its global staff amounting to around 4000 employees. The layoff would also lead to around 1000 job cuts for staff such as janitorial staff. As per a memo obtained by the Financial Times, Marcelo Claure wrote to employees, “Yes, there will be lay-offs–I don’t know how many–and yes, we have to right-size the business to achieve positive free cash flow and profitability.”
WeWork will primarily be focussing on its three key markets- the US, Europe and Japan. As a part of the reorganization, the company may be scaling back from other markets like India, China and Latin America. It is learnt that the company has started building closures in China and other regions.
Earlier, in August 2019, WeWork had filed for a splashy initial public offering (IPO) valuing the company at $ 47 billion, however, it had to shelf its plans after lack of support from investors. The failed IPO has had severe consequences leading to exit of Founder Adam Neuman, as well as the company coming to brinks of bankruptcy. Over the last few weeks, the company has been struggling for survival as it did not have cash to pay its employees. In January, the proposed IPO tagged its value at $47 billion and now SoftBank values the company at just $8 billion. With its past investment and present commitments SoftBank has put in around $ 18.5 billion in the company till now.
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