In a stunning turn of events, not even the influential figure of SoftBank CEO Masayoshi Son could salvage WeWork (ticker: WE) from the clutches of poor decision-making, exorbitant leases, and the lingering economic ramifications of the Covid-19 pandemic.

This debacle serves as a glaring affront to both Son and SoftBank, who own a substantial 74% stake in WeWork’s stock. Throughout this year, the shares have plummeted by over 99%, rendering them virtually worthless. Son’s investment prowess was crystal clear with his early backing of Alibaba (BABA), yet his foray into WeWork will forever be remembered as one of his costliest blunders.

The tale of WeWork is convoluted and intricate. With its inception in 2010 by the visionary entrepreneur Adam Neumann, the company managed to amass significant capital and boast a valuation of $47 billion. However, Neumann’s exuberant optimism for the company was ultimately left unfulfilled. In 2019, WeWork’s initial public offering flopped due to apprehensions among investors regarding mounting losses, an inflated valuation, and allegations of corporate governance malpractices.

As bankruptcy loomed on the horizon, Neumann expressed his disappointment at the news. He lamented, “It has been quite challenging for me to witness from the sidelines since 2019 as WeWork failed to capitalize on a product that holds more relevance now than ever before. I firmly believe that with a well-strategized approach and a cohesive team, WeWork can emerge triumphantly through reorganization.”

Following the abysmal IPO failure, SoftBank formulated a series of financial rescue plans that ultimately allocated a majority of WeWork’s equity to themselves while depriving Neumann of voting control over his remaining shares.

Finally, in October 2021, WeWork managed to go public amidst the ongoing pandemic through a merger with the special purpose acquisition company, BowX Acquisition Corp. The initial valuation stood at $9 billion, momentarily raising hopes for SoftBank.

However, the transition into a publicly traded company failed to alleviate WeWork’s woes. The firm became ensnared in a maelstrom of complications, primarily due to the rise of the work-from-home culture brought by the pandemic and the financial strain imposed by soaring interest rates.

As the curtain falls on WeWork’s tumultuous journey, it serves as a stark reminder of the perils associated with overambitious ventures and hasty valuations. The cautionary tale of WeWork will continue to reverberate throughout the annals of corporate history.

SoftBank’s Efforts to Rescue WeWork Fall Short

In March 2023, SoftBank attempted to save WeWork by implementing a recapitalization plan that aimed to reduce the company’s debt. This plan involved converting a portion of WeWork’s borrowings into equity, which canceled or converted $1.5 billion worth of debt, including the $1 billion held by SoftBank.

Despite these efforts, the company’s financial results for the quarter ending in June revealed a concerning uncertainty about its ability to continue operating. WeWork still had $2.9 billion in long-term debt and $13.3 billion in long-term lease obligations at that time. However, there was a small silver lining as the company’s revenue for the June quarter increased by 4% to $844 million compared to the previous year. Additionally, WeWork narrowed its loss from $634 million in the year-ago period to $397 million in the June quarter.

As WeWork now seeks refuge in the bankruptcy courts, creditors will assess whether the company’s core business, short-term office rentals, can be salvaged. This is not the first time that WeWork’s debt holders have attempted to find a solution to the company’s problems.

Unfortunately, the failure of WeWork’s stock will have lasting effects on the commercial real estate market. It also brings further damage to the reputation of founder Neumann and his primary supporter, SoftBank.

During this challenging period, WeWork will focus on streamlining its commercial office lease portfolio while ensuring business continuity and delivering exceptional services to its members. Global operations are expected to continue as usual, according to a statement by WeWork on Monday night.

WeWork shares were halted on Monday pending news, and SoftBank declined to comment on the trading halt and potential bankruptcy filing, as they are scheduled to report quarterly results on Thursday.

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