WeWork is locked in negotiations this week with its largest shareholder, Softbank Group, over a new $1 billion investment to enable the shared office space company to go through a major restructuring, according to sources familiar with discussions.
If the talks are successful, WeWork will seek to negotiate a $3 billion debt deal with JPMorgan, the sources said.
If the talks are successful, WeWork, which had to abandon an initial public offering last week because of investor concerns about how it was valued and its business model, will seek to negotiate a $3 billion debt deal withSoftBank founder and CEO Masayoshi Son publicly backed WeWork in an interview with Nikkei Business magazine this week, saying in 10 years the company would be "making substantial profits.
But securities analysts say that if it invests in WeWork at a valuation below about $24 billion-$26 billion, which is the estimated basis for its entire stake, then SoftBank and its Vision Fund could suffer on-paper losses. Those would be large if the valuation were closer to $10 billion. WeWork lost $1.9 billion in 2018 and burned through $2.36 billion in cash in the first half of this year, and it could run out of money in the second quarter of 2020 at its current burn rate, according to an analysis last week by securities house Sanford C. Bernstein & Co.WeWork hopes to complete the talks with SoftBank and JP Morgan as early as next week, the sources said, cautioning the plans are subject to change and timetable may still shift.
In recent weeks, global credit rating agencies Standard & Poor's and Fitch Ratings have also downgraded WeWork's credit ratings deeper into junk territory, while the company's junk bond is trading at a record low.
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