SoftBank finally pulled out of its $3 billion deal to purchase office sharing startup WeWork, after murmurs of such last month amid the fiscal turmoil unfolding worldwide due to the coronavirus, according to a report by the Financial Times.
The deal was expected to close April 1. The falling out of the deal is expected to cause backlash. Former WeWork CEO Adam Neumann, ejected from his role last year when the board decided he couldn’t complete his duties properly, is expected to sue.
But SoftBank will still do its part in the form of a $5 billion assistance to help with syndicated debt payments, sources close to the situation told Yahoo Finance.
SoftBank agreed to bail out WeWork last September amid the latter company’s fiscal free-fall after a botched initial public offering (IPO). The end result would’ve boosted WeWork and early backers of the company, such as Benchmark Capital.
However, SoftBank has been busy in recent weeks, working to raise $10 billion for its Vision Fund to help combat the coronavirus pandemic that has disrupted the world’s economy. This process has been difficult due to some of that very same chaos, with oil prices falling and causing strife among Middle Eastern investors, and many companies saying they’ll have trouble surviving. The virus has sent markets plummeting and displaced workers in almost every industry.
Amid everything going on, reports came out last month that SoftBank was looking for an exit on the buying of stock in WeWork, in spite of now owning 80 percent of the company and having made its own operating chief, Marcelo Claure, the executive chair for WeWork.
Of all the participants in the now-defunct deal, Neumann has perhaps the biggest proverbial egg on his face, as he was waiting to draw in $1 billion in stocks connected to SoftBank, Yahoo Finance reported. That was not a fact received well among employees and investors whose stock options are now worthless because of Neumann’s mistakes, which led to WeWork’s chaos in the first place.