SoftBank Unlikely to Conduct Public Tender Offer for WeWork Shares... Deadline Ends on 1st

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Japanese SoftBank Group is unlikely to proceed with the tender offer for office-sharing company WeWork's shares as promised to investors, Bloomberg reported on the 1st (local time). After WeWork's initial public offering (IPO) was canceled last September and the company faced financial difficulties, SoftBank decided in October of the same year to conduct a tender offer to save the company.

Bloomberg, citing sources, reported that SoftBank decided not to purchase additional WeWork shares by the tender offer deadline of 11:59 PM (Eastern Time, US) on the same day. The shares SoftBank initially planned to buy were worth $3 billion (approximately 3.7 trillion KRW). This included $970 million worth of shares held by Adam Neumann, WeWork's co-founder and former CEO who stepped down after the IPO failure. Through this, SoftBank planned to hold an 80% stake in WeWork.

However, in mid-last month, SoftBank sent a letter to existing shareholders stating that it might withdraw the tender offer if investment conditions for WeWork were not met. The reason cited was ongoing legal investigations into WeWork by the U.S. Department of Justice, the Securities and Exchange Commission (SEC), and the states of New York and California. The sharp drop in SoftBank's stock price in mid-last month also seemed to have influenced this decision. Some members of WeWork's board reportedly said they would consider legal action if SoftBank withdrew the offer.

A source told Bloomberg, "Discussions are still ongoing, and there is a possibility that both sides will reach a last-minute agreement." SoftBank has not issued any separate statement regarding this.

If SoftBank withdraws its support, WeWork is expected to face even greater difficulties in business operations. Already struggling to raise funds, the short-term office rental business has been hit hard by the impact of the novel coronavirus disease (COVID-19). Bloomberg reported, "If the tender offer fails, it could cause significant repercussions for WeWork."

SoftBank itself is currently in a crisis. On the 25th of last month, credit rating agency Moody's downgraded SoftBank's credit rating two notches from Ba1 to Ba3 and changed the rating outlook from 'stable' to 'negative.' Although SoftBank announced plans to respond by selling assets worth 4.5 trillion yen (approximately 52 trillion KRW), the market situation remains challenging due to the impact of COVID-19. Moody's stated, "If the credit ratings of investment companies such as WeWork deteriorate significantly or debt increases, further downgrades of the credit rating may occur."