SoftBank and JP Morgan are in talks to rescue WeWork before it runs out of money, which is expected to happen by mid-November, CNBC reported on Tuesday (Oct. 15).
Sources told CNBC that talks between SoftBank and JP Morgan have been ongoing ever since the startup’s IPO was pulled about two weeks ago. The bailout could involve equity from SoftBank and debt from J.P. Morgan, sources said.
SoftBank is WeWork’s biggest outside investor and JP Morgan is the startup’s third-largest stakeholder and was in charge of heading the initial public offering (IPO). In the bailout effort, JP Morgan has tapped 100 potential investors, the sources said.
JP Morgan is pulling together a funding package of about $5 billion rather than selling shares to SoftBank. Softbank has already provided WeWork with over $10 billion.
WeWork co-founder and ousted CEO Adam Neumann holds the biggest stake in the company, but his voting shares were greatly reduced and he lost majority voting control, a source told CNBC.
WeWork will lay off at least 2,000 staff in the coming week — 13 percent of its 15,000 payroll — with thousands of more job losses expected to follow.
“The atmosphere is toxic. A lot of people worked so hard for this company. We thought we were in on something really big,” a worker told the Guardian anonymously on Tuesday (Oct. 15).
The cuts follow the embattled startup’s failed IPO and the stepping down of Neumann from CEO. New co-CEOs Artie Minson and Sebastian Gunningham stepped in to replace the unconventional leader.
The office rental company has endured a precipitous collapse following investor concerns over its management and business model.
The company had been valued as high as $47 billion, once making it America’s highest-valued private firm. Neumann cashed out $700 million of his own shares before the company’s valuation was cut to almost half.
SoftBank reportedly wants have a bigger role in WeWork’s operations and push Neumann further aside.
