Less than a week we reported that according to the Nikkei, Softbank was set to provide WeWork with a $5 billion bailout loan, one which we dubbed tongue in cheek a pre-petition DIP loan.
SOFTBANK PLANS TO FINANCE WEWORK WITH ABOUT $5B: NIKKEI— zerohedge (@zerohedge) October 16, 2019
DIP Loan Secured
It now appears our assessment was accurate, because moments ago CNBC's David Faber, and Dow Jones moments later, confirmed that WeWork appears to have snubbed a debt deal being arranged by JPM (arguably due to its exorbitant interest rate demands, which last week was rumored to be between 8% and 15%), and was instead set to hand over control to Japan's venture capital debacle, SoftBank, which is set to spend $4-5 billion on new WeWork equity, in a deal which values WeWork around $8 billion (we suppose this is pre-money valuation), and which together with WeWork's existing ownership to the tune of $10BN invested by way of its Vision Fund, would grant SoftBank full control over the flaming fiasco that is WeWork, whose valuation has crashed from $47BN a few months ago to less than $8BN.
As Dow Jones adds, the SoftBank investment would total $6.5 billion, including a $5 billion loan, which means its equity investment would be "only" $1.5 billion.
In other words, SoftBank is throwing even more good money after a vanity investment whose value is arguably zero, but because SoftBank wants to be able to still show idiotic slides such as this one...
How do you know it's the biggest bubble in history? This slide from Softbank pic.twitter.com/065dyDrwZW— zerohedge (@zerohedge) September 8, 2019
... without inspiring riotous laughter, it has no choice but to buy WeWork a few more quarters of breathing room, just so SoftBank isn't forced to mark its investment at zero.
But wait there's more: as the WSJ adds, SoftBank will also buy more than $1BN in shares from employees and investor. One wonders just how excited SoftBank investors must be about the prospect of bailing out deeply underwater WeWork employees... if not Adam Neumann: as we know, he already extracted $700MM from the company.
And speaking of the $5BN in new capital, which the company desperately needed as it would have run out of cash as soon as next month, it will be WeWork - which currently burns through $3 billion per year -roughly 18 months of time unless somehow the company manages to slash its cash burn... which it can of course do, but it will also cripple its revenue, as its entire "scalable" business model is premised upon selling one dollar for 50 cents.
Take that model away, and SoftBank just threw away another $5 billion. What happens then? Well, there's a tweet for that too.
When is the BOJ's bailout of Softbank?— zerohedge (@zerohedge) September 5, 2019