SoftBank Group told shareholders of WeWork that it could withdraw from an agreement to buy US$3-billion of stock in the embattled co-working business, casting doubt on a deal that had been set to close in about two weeks.
In a message to stockholders, the Japanese conglomerate cited numerous government inquiries into WeWork, including those from US attorneys, the Securities and Exchange Commission, attorneys-general in California and New York, and the Manhattan district attorney.
SoftBank’s shares slid as much as 12% in Tokyo — their biggest intraday fall since October 2012 — weighed down also by an outlook cut by S&P Global Ratings on Tuesday. Spokeswomen for SoftBank and WeWork parent company We Co declined to comment. The Wall Street Journal reported the e-mail to shareholders earlier on Tuesday.
The WeWork stock purchase was part of a rescue financing from SoftBank after WeWork’s failed initial public offering last year. SoftBank already invested $1.5-billion as part of the bailout in October and is looking to arrange billions of dollars more in debt.
A delay or cancellation of the offer to buy stock would cut off a source of income many former and current WeWork employees had been counting on. Adam Neumann, who was ousted as CEO during the turmoil, was slated to sell as much as $970-million in stock as part of the deal.
Executives at SoftBank had been looking to alter the stock agreement since at least November. They discussed possible ways to reduce the purchase amount, a move that would be designed partly to limit Neumann’s payout.
Lower price?
This week’s notice from SoftBank raises questions about whether it may seek to negotiate a lower price, delay the purchase until the economy stabilises or withdraw entirely. SoftBank’s stock is down 27% this month, and economists from Goldman Sachs Group and Morgan Stanley say a global recession is under way.
The worldwide market rout could hammer the value of SoftBank’s assets if it persists, S&P said in trimming the company’s outlook. The credit-rating agency said SoftBank’s plans to spend about $4.8-billion on a share buyback amid plummeting stock markets raises questions about its prioritisation of financial soundness. — –With assistance from Sarah McBride and Pavel Alpeyev. — Reported by Ellen Huet, with assistance from Sarah McBride and Pavel Alpeyev