WeWork posts a surprising gain in revenue and gets a $1.1 billion loan from SoftBank
Like many businesses with a heavy real-estate presence, WeWork struggled as the pandemic pushed employees out of offices and into homes. It started another round of layoffs in late April, and investor SoftBank valued the company at $2.9 billion in May, a significant downtick from $47 billion a year ago.
But in its second quarter earnings report last week, WeWork surprisingly said revenue rose, adding that SoftBank committed another $1.1 billion, in the form of senior secured notes, to the business.
In a memo to staff, WeWork chief financial officer Kimberly Ross said revenue in the quarter rose 9% year-over-year to $882 million. While that figure is down roughly 20% ($1.1 billion) from the quarter earlier, “Covid-19 has had an impact on our business,” Ross wrote in the memo first viewed by Bloomberg.
The company is still burning quite a lot of cash. In the last quarter alone, WeWork posted “free cash outflows,” a rarely used euphemism for cash burn, of $671 million, a higher rate from the first quarter.
SoftBank’s fresh debt funding also comes after the telecom giant backed out of plans to buy $3 billion in WeWork shares from existing shareholders, including Adam Neumann. WeWork is now facing a lawsuit from the founder, as well as a committee made up of investor Benchmark and board member Lew Frankfort, over the issue. A $1.1 billion financing commitment was originally tied to that tender offer, but went up in the air after the deal was scrapped.
The thing is, SoftBank has already sunk over $10 billion into WeWork. So for SoftBank, a direct investment into the company makes more sense than spending $3 billion on equity that won’t directly feed into such a large investment’s coffers. Though, it’s perhaps not much of a consolation for investors that were on the verge of cashing out.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
