Via Financial Times

Adam Neumann, the flamboyant co-founder of WeWork, will be stripped of his outsize voting power and chairmanship of the lossmaking property company, under a $9.5bn rescue proposal from its largest investor, SoftBank, set to be considered by the board on Tuesday.

Mr Neumann would be left with less than 10 per cent of the shares and voting rights at the company, three people briefed on the plan told the Financial Times. Marcelo Claure, SoftBank’s chief operating officer, would become chairman.

SoftBank will emerge with between 60 per cent and 80 per cent of WeWork’s equity under the package, which involves $5bn of new debt, injecting $1.5bn in equity and an offer to buy up to $3bn of existing shares.

The reduced status of Mr Neumann under the emergency refinancing caps the striking fall of a self-described visionary who two months ago was hoping to take his company public in one of the hottest stock market flotations of the year. Having previously expected his family to take charge of WeWork far into the future, Mr Neumann will now see his company under the control of SoftBank, the Japanese technology and telecoms group founded by Masayoshi Son.

WeWork’s equity valuation will be slashed to roughly $8bn if the board agrees to the rescue by SoftBank, which had pumped the office space provider’s valuation up to $47bn with more than $10bn of earlier investments and funding commitments.

WeWork’s failed initial public offering and a rapidly depleting cash pile have forced it to consider rival rescue packages from SoftBank and JPMorgan Chase, the bank which led its attempt to go public.

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The SoftBank proposal which was being considered late on Monday includes bringing forward the $1.5bn equity injection the Japanese group had previously planned to make in April next year. SoftBank’s Saudi Arabia-backed Vision Fund, which invested alongside Mr Son’s company in earlier funding rounds, is not expected to contribute to the financing.

WeWork would abandon its dual-class share structure, which at one point gave Mr Neumann 20 times the voting power of other shareholders, under the SoftBank proposal, according to the three people briefed. Those voting rights, as well as a series of deals Mr Neumann conducted with the company, emerged as a big source of concern for investors when the group was preparing for its IPO.

Mr Neumann currently controls an economic stake of just over 20 per cent in an investment vehicle with his co-founder Miguel McKelvey. Those voting rights were cut to three times those of ordinary shares when Mr Neumann was ousted as chief executive last month.

The rescue deal also involves a tender of up to $3bn for shares held by WeWork’s existing shareholders, including Mr Neumann, who would agree to sell part of his holding to Mr Son’s group, one of the people said. Reuters news agency reported the size of the tender offer earlier on Monday; CNBC television reported that the WeWork board could accept the SoftBank offer as early as Tuesday.

JPMorgan has been pitching its own $5bn funding package over the past two weeks and has met roughly 100 institutional investors it hoped would finance the borrowing. The proposal from the Wall Street lender was set to include roughly $2bn in unsecured debt, structured as payment-in-kind notes that carried a coupon of 15 per cent.

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The debt in the SoftBank proposal would be on better terms than the debt financing cobbled together by JPMorgan, however, one person briefed on the rival offers said.

The two offers are set to be formally submitted to the board on Monday and directors are expected to meet on Tuesday to decide which proposal to take. The company faces a cash crunch by the end of November if it does not secure an injection of new money.

The price of the company’s bonds rallied on Monday, rising from just over 84 cents on the dollar to a high of almost 86 cents. WeWork and SoftBank declined to comment.