Revised Prediction for WeWork: Is Bankruptcy on the Table?

As some of our readers may recall, last year we wrote a post entitled; ‘Friday Digest: Is the endgame near for SoftBank & WeWork?’ were we predicted 2020 would be a crunch year for WeWork. More recently we wrote a post entitled ‘We Predict a 63% Probability that WeWork will go to a PE Firm!’, in which we predicted that a Private Equity buyout would be the preferred course for the company’s major stakeholders such as SoftBank.

Over the past few hours, reports in the press suggest that SoftBank will be pulling out of a $3Bn commitment it made last year to buy WeWork shares.

What is the revised prediction?

Analysis by our team at Kähler VC.X strongly indicates that the following two options are now most likely:

  • Real-Estate Private Equity (we compute a 50% probability) - with this option, a deep-pocketed real-estate PE fund (e.g. Blackstone Group) buys a majority stake from SoftBank. Just this week, WeWork offloaded Meetup to AlleyCorp and other private investors.

  • WeWork Bankruptcy (we compute a 50% probability) - with this option, SoftBank will simply pull the life support plug, something that would’ve been unthinkable before COVID-19. However, with remote work becoming the norm, it’ll be hard for SoftBank to justify subsidizing high rents for an undetermined period of time. In fact, according to press reports, the company is asking Landlords to help cut its rent bills by up to 30%.

The bottom line is, even with the support packages being offered by governments around the world to mitigate the adverse effects of COVID-19, the current downturn provides SoftBank with a way out or at least an opportunity to massively reduce its WeWork stake. The giant firm’s latest moves suggest the end game is near!


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