Concerns about SoftBank loans raised as talks with WeWork begin

24 Sep 2019

Masayoshi Son, chair and CEO of SoftBank Corp. Image: Imagechina-Editorial/Depositphotos

Ahead of negotiations with WeWork’s Adam Neumann about his future at the company, it emerged that SoftBank has been offering executives loans worth 10 times their salaries to invest in Vision Fund 2.

On Tuesday (24 September), the Financial Times reported that SoftBank executives aren’t particularly eager to back SoftBank up on its offer to lend employees $20bn to invest in its VC fund, Vision Fund 2.

According to the publication, the investment scheme is being viewed within the Japanese group as a “test of loyalty” to founder Masayoshi Son.

While participation is optional, employees are being encouraged to take out loans that are up to 10 times their base salary, a move that is seen as especially risky when the original Vision Fund is currently in a vulnerable position.

Earlier this month, it was reported that SoftBank asked WeWork to shelve its upcoming IPO, as a disastrous public offering could dissuade investors from trusting the second iteration of the Vision Fund.

WeWork woes

SoftBank’s concerns about WeWork have not been helped by recent media coverage of the co-working space company’s CEO, Adam Neumann. A week ago, the Wall Street Journal published a profile on the founder after it emerged that WeWork was considering halving its $47bn valuation ahead of an IPO.

This profile noted that Neumann reportedly left a cereal box full of weed on a plane, prompting the plane’s owner to order it back because he feared he would be dragged into an international drug trafficking scandal.

Another source told the publication that Neumann fired 7pc of his employees on one occasion. After doing this, he had some of the remaining employees bring trays of tequila shots into the room, before Run-DMC’s Darryl McDaniels entered to perform, ‘It’s Tricky’.

Another source claimed that Neumann’s wife, Rebekah, once had multiple employees fired immediately after meeting them because “she didn’t like their energy”.

Talks with SoftBank

According to CNBC, Neumann has today begun talks with WeWork’s board of directors and investors to discuss his future within the company, and whether he will be allowed to stay on as CEO if the IPO goes ahead.

Sources involved in the matter said that Neumann has not agreed to step down and there is no certainty that he will actually do so.

According to some reports, Neumann could trade his position as CEO for the role of chairperson. Alternatively, SoftBank could bring in an independent chairperson to join the board.

If there is a change in leadership, it’s unlikely the company would be able to go ahead with its planned IPO before the end of 2019, which would impact the financing it raised on the contingency of launching the public offering in the coming months.

Future doubts

As time goes on, commentators are becoming more convinced that the IPO will be shelved. Scott Galloway, the entrepreneur and writer who labelled the company ‘WeWTF’ this summer, has a number of predictions for both SoftBank and WeWork in the coming weeks.

After commenting about the future of WeWork on BBC, the Wall Street Journal and The Washington Post, he shared a lengthier account of his thoughts about the company on his blog.

Short term, Galloway predicts: “In the next 30 days, a series of explosive investigative journalism pieces will document breathtaking malfeasance at We.”

In the longer term, Galloway expects some kind of regulatory body to investigate the company. The industry commentator also predicted that “over the next 12 months, SoftBank’s Vision Fund will be shuttered”.

Masayoshi Son, chairperson and CEO of SoftBank Corp. Image: Imagechina-Editorial/Depositphotos

Kelly Earley was a journalist with Silicon Republic