A big part of SoftBank’s bailout plans for office sharing company WeWork could be in jeopardy after SoftBank backed away from a plan to buy $3 billion worth of the company’s shares, according to a report by The Wall Street Journal.
On Tuesday (March 17), WeWork shareholders were sent a message from SoftBank claiming that several regulatory probes into WeWork were being done by not only the Department of Justice (DOJ), but also the Securities and Exchange Commission (SEC). SoftBank said these circumstances gave it an out on the deal.
Adam Neumann, the former CEO of WeWork parent company We Co., would have the right to sell up to $970 million of stock, according to the terms of the deal, which saw him ousted from the company. Neumann gave up his board seat and was given $185 million in a consulting fee.
There’s also the issue of the $5 billion given to WeWork directly from SoftBank, which was the company needed as it ran out of money to operate with. The company will continue to need that money as the coronavirus scare continues to ravage its business. That money is reportedly still in play, and about $1.5 billion has already been invested.
The deal wasn’t explicitly canceled, so the move could potentially be a negotiating one, or a way to postpone the investment during a time of market instability. The stock market has been up and down since the coronavirus began spreading.
The DOJ and SEC both sent SoftBank demands for information about WeWork and the way it conducts business. The shares were previously going to be bought on April 1.
The coronavirus is expected to especially hit WeWork’s business model as millions of people were sent home from work across the globe. In San Francisco, for example, citizens have been ordered to shelter in place.
A recession would potentially harm smaller companies, which are some of WeWork’s most valuable customers.