WeWork sues Softbank over canceled tender offer

Yahoo Finance Video

April 7, 2020 at 9:20 AM

Yahoo Finance's Alexis Christoforous and Brian Sozzi break down the latest news on WeWork.

Video Transcript

ALEXIS CHRISTOFOROUS: We have some breaking news on SoftBank we want to share with you right now. WeWork is suing SoftBank after the company withdrew its $3 billion tender offer, the company claiming that SoftBank breached its obligations under their agreement. Brian Sozzi is here. And, Brian, I know that you have been watching this story unfold very closely. I guess this shouldn't be a huge surprise that WeWork is suing. The question becomes, are they going to get anything out of this lawsuit?

BRIAN SOZZI: Yeah, right, Alexis. What do the kids say nowadays? "Awkward," and that's what this situation is. SoftBank has dumped over $14 billion into this company, close to 5 billion since last October. And as Yahoo Finance reported last week, they have decide-- SoftBank has decided to no longer go forward with that tender offer for WeWork shares that was put together late last year, which probably would have made founder Adam Neumann close to a billionaire as he tendered those shares.

But both these companies are intertwined. I'm not surprised to see that WeWork news. I did reach out to WeWork for comment. They have not returned my request for comment on the suit.

ALEXIS CHRISTOFOROUS: You know, Brian, part of that tender offer, of course, would have benefited shareholders, including former CEO Adam Neumann who came under a lot of criticism for the way he was leading that company. But where does this leave the workers at WeWork, those people who were there with them at the ground level, who built this company with them, and who were really hoping that they would have some actual equity in this company right now?

BRIAN SOZZI: Well, what workers are left there, I know a lot of people that I have talked in the past that have worked at WeWork are no longer there. They already have new jobs elsewhere. So I think that those early employees, I think they've come to realize that WeWork is not the WeWork they signed up for.

This is not the same company. Now, WeWork has come out and said they have enough liquidity that would last until 2024-- different company. They've laid off a lot of workers because they have to. They're in cash preservation mode, especially as a result of the coronavirus.

ALEXIS CHRISTOFOROUS: You know, Brian, I wonder just about the business model in general, right? Shared workspace, the idea of that just seems absurd in a post-pandemic world now. I mean, do you think that WeWork will even be able to survive this because of their cash crunch? But also other companies, smaller companies like WeWork that have the same business model, I just don't think there's going to be the demand there for the shared workspace when we do come out of this.

BRIAN SOZZI: Just that very word, Alexis, "shared workspace" doesn't, at least, excite me and I'm sure a lot of other people now on working closer to one another. Look, we're all working from home. And I think that WeWork business model was founded, we just set up a desk. We could work. We could collaborate.

But that, the way we are doing work, is fundamentally changing. And I think for WeWork to come out here and suggest that they have enough liquidity until 2024 is complete fallacy. I wouldn't be surprised if this company is forced to raise money. Where it comes from very, very much unclear.

ALEXIS CHRISTOFOROUS: Exactly. And also, they came under a lot of criticism because they're not giving breaks to a lot of their customers. People are saying, listen, I can't use the workspace. I can't pay for the workspace. A lot of their customers are startups, so they don't have a lot of cash on hand to begin with. I mean, that's also just not optically looking pretty good for WeWork right now, Brian.

BRIAN SOZZI: No. And again, it goes back to saying like, can-- do they have enough liquidity to survive to '24? Do they have enough liquidity to survive deep into 2020?

ALEXIS CHRISTOFOROUS: Exactly.

BRIAN SOZZI: This is a company that has some very, very high rents in some of the most popular or well-trafficked urban locations. Those locations are now complete ghost towns.

ALEXIS CHRISTOFOROUS: Yeah, and to think, months ago, we were talking about this being a highly anticipated IPO. Fortune's definitely changed big time for WeWork. All right, Brian, thanks a lot for that.

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