New York, Oct 23 (IANS) Japan-based tech giant Softbank has infused $5 billion in new financing into the struggling co-sharing workspace company WeWork.
In a statement, Softbank said it would provide up to $3 billion for the existing shareholders of WeWork. The deal will see Softbank stake increasing to 80 per cent in the company.
SoftBank will also accelerate an existing commitment to fund $1.5 billion.
Adam Neumann, the founder and CEO who is receiving nearly $1 billion to leave, will become a board observer without any voting power.
SoftBank had made it clear that WeWork's Neumann had to step down as CEO who drew flak from investors after the company filed its draft papers to go public.
The funding provides WeWork with significant liquidity to execute its business plan to accelerate the company's path to profitability and positive free cash flow, Softbank said in a statement.
“SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution,” said Masayoshi Son, Chairman and CEO of SoftBank Group Corp.
“It is not unusual for the world's leading technology disruptors to experience growth challenges as the one WeWork just faced. Since the vision remains unchanged, SoftBank has decided to double down on the company by providing a significant capital infusion and operational support,” he added.
Marcelo Claure, CEO of SoftBank Group Corp., will become Executive Chairman of WeWork.
“The new capital SoftBank is providing will restore momentum to the company and I am committed to delivering profitability and positive free cash flow,” said Claure, the former Sprint CEO.
Artie Minson and Sebastian Gunningham will remain co-CEOs of WeWork.
As of Q2 2019, WeWork had 528 locations in over 111 cities and 29 countries. Its 527,000 memberships represent global enterprises across multiple industries, including 38 per cent of the Global Fortune 500.