WeWork has no choice but to abandon its highly-debated dual-class shares structure that many industry experts shunned if the once-ambitious startup decides to agree with SoftBank's salvage proposal.
Four people with knowledge of the matter told the Financial Times that WeWork is expected to meet with the SoftBank negotiating team on Tuesday in efforts to save the company that planned an ambitious initial public offering (IPO) this year.
Should WeWork decide to go for the deal, co-founder Adam Neumann will see his voting rights slashed to less than 10 percent, with his shares also getting a massive cut. Under the proposal, the company also has to scrap its dual-class shares structure that gave Neumann a large chunk of the board's overall voting power.
While the initial valuation of the shared workspace startup sat at $47 billion months back, the rescue deals put the company only at a valuation of roughly $8 billion. Furthermore, the new chairman would be SoftBank Chief Operating Officer, Marcelo Claure.
The deal may be too much for Neumann to handle, some industry experts noted. On the other hand, he will be paid around $200 million, two sources noted.
Finally, SoftBank will hold about 60 to 80 percent of the startup's equity if the deal is sealed during the emergency meeting. The rescue package includes an offer to purchase $3 billion of existing company shares, as well as $5 billion in new debt.
JPMorgan also battled to stay in the game of salvaging what's left of WeWork. The financing leader's package includes around $2 billion in unsecured debt, despite meeting with roughly 100 potential investors who could help with the funding proposal.
While the company's IPO plan appeared to be on the right track at first, the management system was widely criticized by industry experts and financial institutions, CNN reported.
Among the issues that analysts raised include massive and apparent losses, Neumann's voting rights and overall authority, and the absence of women on the WeWork board. Due to the increasing scrutiny, Neumann decided to step down as the CEO.
WeWork is reportedly planning layoffs in the coming months, as well as potential sales of the other startups it acquired before its halted troubled IPO. WeGrow, the firm's school, is also expected to stop operating next year.
In August, the company said it lost $900 million during the first six months of the fiscal year, with more critics questioning the startup's management and operational systems.
The company is now focused on raising new capital before its expected cash dry-up next month. It remains to be seen whether WeWork will choose SoftBank or JPMorgan for the rescue package.
