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OneWeb collapses after SoftBank funding talks fall through

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Via Financial Times

OneWeb, the satellite internet start-up, is preparing for bankruptcy and to lay off most of its staff, after failing to secure new funding from investors including its biggest backer SoftBank, according to people familiar with the situation. 

The company could file for Chapter 11 bankruptcy protection in the US as soon as Friday, according to people involved in the preparations, putting most of its more than 500 employees at risk of losing their jobs. 

OneWeb had been in talks with Softbank to raise as much as $2bn in fresh funding before the coronavirus outbreak roiled financial markets, according to people familiar with the discussions. 

As markets plunged, OneWeb and SoftBank could not agree terms for a potential bridge loan to give the start-up time to secure new investors. One person close to the discussions said that those talks collapsed on Saturday, just hours before OneWeb launched more than 30 “micro satellites” from the Baikonur Cosmodrome in Kazakhstan to a constellation that it had originally envisaged would total around 640. 

The aborted deal with SoftBank comes as the Japanese group is also threatening to pull out of a previously agreed $3bn purchase of stock in WeWork. 

OneWeb and SoftBank declined to comment.

Using its low earth orbiting satellites, OneWeb aimed to beam affordable wireless broadband services to anywhere in the world, including remote regions, ships and planes.

It had previously raised $3.4bn from investors including Airbus, Richard Branson’s Virgin Group, Qualcomm, Bharti Enterprises and Grupo Salinas, making it one of the highest-profile casualties of the coronavirus-induced market meltdown among private technology companies. 

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With the hand of SoftBank founder Masayoshi Son behind it, OneWeb was at the head of a pack of new satellite internet companies, alongside Elon Musk’s SpaceX and Amazon’s Project Kuiper. More than $20bn has been poured into 435 start-up satellite companies since 2009, according to Space Angels, a venture capital company. 

When he first invested $1bn in OneWeb in December 2016, Mr Son made the deal a cornerstone of his pledge to newly elected US president Donald Trump to create tens of thousands of new American jobs. OneWeb built its satellites at a facility in Florida, using a mass-production process that promised to transform the economics of the industry. 

But after Friday’s job losses, only a few dozen people will still be working at OneWeb to manage around 70 satellites already in orbit, thereby allowing it to keep its spectrum licence. However, the constellation is currently too small to offer telecoms services or generate revenues and the potential value of its radio spectrum to any acquirers is unclear.

One person familiar with SoftBank’s thinking said OneWeb was originally destined to be folded into the group’s Vision Fund before Mr Son began to have doubts about the company. 

SoftBank, which is heavily indebted, has been battling to defend its own share price after a collapse in global stock markets triggered by the economic effects of the coronavirus pandemic.

The FT revealed this week that Mr Son explored plans to take the group private before electing to sell $41bn in assets to boost a planned share buyback and to pay down some of its $55bn in net debt.

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It also faces pressure to recapitalise some of the start-ups held in its Vision Fund portfolio, which are scrambling to secure cash to continue operations. Its shares have climbed 44.5 per cent from a four-year low this week. 

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