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WeWork sues SoftBank over canceled $3B tender offer

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Re: WeWork sues SoftBank over canceled $3B tender offer

#21

Post by DebtDeflation »

llsf wrote: post #13

I read that Wework had $4B in the bank at the beginning of the year. Also they are actively trying to reduce their own rent up to 30% from their landlords. And at the same time Wework gives up to 50% discount to its own large tenants, so they can stay during this hard time. No idea how long it can operate like that. If Wework had to crash, I am concerned for the whole US commercial real-estate. Wework is renting so m…

I tried to do some back of the napkin math.

- According to their financial reports, they burned through $1.4B in Q4 and they ended 2019 with $4.4B in "cash and commitments".

- The $4.4B number is comprised of $1.3B in cash, $2.2B in LOCs from SoftBank that they can draw against, $800M in Restricted Capital, and $100M in money owed to it by another company from a joint venture.

- Given their burn rate, it's likely that they're actually out of actual cash now and can probably survive for another 4-5 months by drawing down their LOCs.

- However, that assumes revenues remain constant, which they're not - tenants are canceling due to both Covid-19 as well as concerns about WeWork's financial viability.

Realistically, they have until maybe the end of June?

Re: WeWork sues SoftBank over canceled $3B tender offer

#22

Post by nick_kline »

llsf wrote: post #13

I read that Wework had $4B in the bank at the beginning of the year. Also they are actively trying to reduce their own rent up to 30% from their landlords. And at the same time Wework gives up to 50% discount to its own large tenants, so they can stay during this hard time. No idea how long it can operate like that. If Wework had to crash, I am concerned for the whole US commercial real-estate. Wework is renting so m…

Their revenue should shrink by massive margins, as a start all temp rental agreements month to month are gone. Did they even have 50% long term rental? Their main hope is survive until this goes away, then wait for step 2, startups and entrepreneurs need their space, in bulk. Those are not happening for many months in total.

Re: WeWork sues SoftBank over canceled $3B tender offer

#23

Post by pgwhalen »

JumpCrisscross wrote: post #19
llsf wrote: post #13

I read that Wework had $4B in the bank at the beginning of the year. Also they are actively trying to reduce their own rent up to 30% from their landlords. And at the same time Wework gives up to 50% discount to its own large tenants, so they can stay during this hard time. No idea how long it can operate like that. If Wework had to crash, I am concerned for the whole US commercial real-estate. Wework is renting so m…

> WeWork is renting so many square feet WeWork is big. CRE is huge. WeWork is not even among the top ten largest lessees in America.

Source for that? I’d be curious what the top ten are.

Re: WeWork sues SoftBank over canceled $3B tender offer

#24

Post by LatteLazy »

code4tee wrote: post #5

Quote: WeWork’s board said that it “regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders.” Of course they’re going do to that, it’s called fiduciary duty to their own stakeholders! Such diligence is something WeWork’s board seemed to casually overlook for far too long. At this point why would SoftBank buy WeWork shares that are in all likelihood worth litt…

The fact they're suing does imply that there were not contingency clauses. Otherwise, why piss off your largest investor/shareholder/backer?

Re: WeWork sues SoftBank over canceled $3B tender offer

#25

Post by devmunchies »

gullyfur wrote: post #15
code4tee wrote: post #5

Quote: WeWork’s board said that it “regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders.” Of course they’re going do to that, it’s called fiduciary duty to their own stakeholders! Such diligence is something WeWork’s board seemed to casually overlook for far too long. At this point why would SoftBank buy WeWork shares that are in all likelihood worth litt…

Has anyone estimated how many months WeWork has until it collapses?

probably better to measure in WEeks.

Re: WeWork sues SoftBank over canceled $3B tender offer

#26

Post by H8crilA »

I really hope WeWork wins this one. The world of "investing" needs to chill a little and see a few outrageously exuberant bulls absolutely destroyed before we go from a big bubble to a massive bubble, and then to a massive crash.

But then again Masa was already possibly the worst investor in the history of humanity, even before the Vision Fund, so who will take note this time? If he lives through the next 20 years he'll probably run yet another, equally idiotic fund.

Re: WeWork sues SoftBank over canceled $3B tender offer

#27

Post by csours »

code4tee wrote: post #5

Quote: WeWork’s board said that it “regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders.” Of course they’re going do to that, it’s called fiduciary duty to their own stakeholders! Such diligence is something WeWork’s board seemed to casually overlook for far too long. At this point why would SoftBank buy WeWork shares that are in all likelihood worth litt…

Quoting from Matt Levine:

> That is a good little window into mergers-and-acquisitions lawyering. SoftBank’s agreement with WeWork isn’t public, but presumably it says something like “SoftBank can cancel the tender if there are any material government restrictions on WeWork’s business,” but it doesn’t say something like “SoftBank can cancel the tender if lots of customers cancel their WeWork memberships.” The very rough general rule in mergers and acquisitions is that if business conditions get worse, that’s the acquirer’s risk, but if there is some legal problem with the business then that’s the seller’s risk.

Emphasis mine

Re: WeWork sues SoftBank over canceled $3B tender offer

#28

Post by jacquesm »

A big chunk of their intensifying crisis will be the drying up of whatever income they still had. Short term rentals are great for the renters: easy to say "stop now", and that's exactly what this COVID-19 crisis has done for many companies. If they were using WeWork before they are now using it less or not at all.

Re: WeWork sues SoftBank over canceled $3B tender offer

#29

Post by jacquesm »

csours wrote: post #27
code4tee wrote: post #5

Quote: WeWork’s board said that it “regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders.” Of course they’re going do to that, it’s called fiduciary duty to their own stakeholders! Such diligence is something WeWork’s board seemed to casually overlook for far too long. At this point why would SoftBank buy WeWork shares that are in all likelihood worth litt…

Quoting from Matt Levine: > That is a good little window into mergers-and-acquisitions lawyering. SoftBank’s agreement with WeWork isn’t public, but presumably it says something like “SoftBank can cancel the tender if there are any material government restrictions on WeWork’s business,” but it doesn’t say something like “SoftBank can cancel the tender if lots of customers cancel their WeWork memberships.” The very ro…

There are quite a few of those M&A contracts that contain clauses against the business conditions getting worse outside certain bands and some that allow withdrawal for exactly that: changing market conditions. Without the text of the contract there isn't much to say about any of this.

Re: WeWork sues SoftBank over canceled $3B tender offer

#30

Post by jacquesm »

H8crilA wrote: post #26

I really hope WeWork wins this one. The world of "investing" needs to chill a little and see a few outrageously exuberant bulls absolutely destroyed before we go from a big bubble to a massive bubble, and then to a massive crash. But then again Masa was already possibly the worst investor in the history of humanity, even before the Vision Fund, so who will take note this time? If he lives through the next 20 years he…

They were funded based on the bubble, I don't see why the bubble collapsing wouldn't see them crash.
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