The board of WeWork, the cash-starved purveyor of shared workplace house, might select between two competing monetary rescue packages as early as Tuesday, in accordance with folks with information of the matter. One is being provided by SoftBank, and one other from a monetary consortium led by JPMorgan Chase.
SoftBank, a Japanese expertise big that’s already the most important exterior shareholder in WeWork, is providing to take a controlling stake by accelerating a $1.5 billion funding it had deliberate to make subsequent 12 months and by shopping for as much as $three billion in shares held by different buyers, two folks stated. SoftBank can also be providing to place collectively loans totaling $5 billion from a consortium of economic establishments, together with itself.
JPMorgan’s proposal consists of a number of elements, together with new bonds, a few of which might carry excessive rates of interest, in accordance with an individual with information of its plans. That bundle might add as much as roughly $5 billion.
The potential money infusion comes at a vital time for WeWork, which scrapped an preliminary public providing final month after Wall Street balked at its enormous losses — it had an working lack of $1.four billion within the first six months of the 12 months on income of $1.5 billion.
WeWork’s charismatic chief government, Adam Neumann, was ousted shortly before the I.P.O.’s withdrawal as skepticism about the company’s long-term viability mounted. There was also investor concern about an unconventional corporate governance structure that gave Mr. Neumann enormous control.
Under the SoftBank proposal, Mr. Neumann would relinquish the control he still has over WeWork as its largest individual shareholder and step down from the company’s board, giving up his position as nonexecutive chairman, according to two people with knowledge of the transaction. It was not clear how large a stake Mr. Neumann would retain in WeWork if SoftBank took control of the company.
Once one of the world’s most celebrated start-ups, WeWork was valued by SoftBank at $47 billion in January but had considered selling shares in its initial public offering at a valuation as low as $15 billion. SoftBank’s latest offer to the company values it at a little less than $8 billion.
Under Mr. Neumann’s leadership, the company expanded so fast that it is the largest private tenant in Manhattan and a major force in London, San Francisco and other big cities.
In recent weeks, it has been seeking to raise billions of dollars to keep going. In its I.P.O. filing, WeWork said it had $2.5 billion in cash at the end of June but also revealed that it was burning through hundreds of millions of dollars every month.
SoftBank, which has invested about $10.5 billion in WeWork, has more than its investment in the company at stake. A collapse of WeWork could hurt SoftBank’s efforts to raise a second Vision Fund, a sequel to its roughly $100 billion technology investment fund.
JPMorgan also has extensive ties to WeWork. It was one of the lead underwriters of the aborted I.P.O. and has made large loans to Mr. Neumann. The bank had been leading talks with WeWork to renegotiate a $6 billion financing package that was tied to the public offering.
WeWork’s need for cash is behind the urgent efforts. The company’s rapid expansion requires a steady stream of money to pay rent and refurbish new locations.
In the 18 months through the end of June, WeWork used nearly $4 billion to fund operations and expand into new spaces. It could not have done all of that without a huge flow of cash from SoftBank.
The I.P.O. and loans contingent on the offering were expected to raise as much as $10 billion. WeWork must now try to get by with a much smaller financial infusion.
Some Wall Street analysts had estimated that WeWork would run out of cash by the middle of next year at its recent growth rate. But other experts say the company is already facing a financial squeeze.
Vicki Bryan, chief executive of Bond Angle, a research firm, said WeWork might have been able to tap into only $1.5 billion of the $2.5 billion that it said it had at the end of June. Use of the rest of the money appears to be restricted because it included customer security deposits or because it was held by the company’s subsidiaries, she said.
In the first half of this year, WeWork consumed about $1.5 billion. If the company has continued to spend money at that rate, it may have depleted most of its unrestricted cash.
If it ends up taking control of WeWork, SoftBank would need to make some tough decisions quickly. It could seek to halt WeWork’s expansion to reduce expenses. The co-chief executives who replaced Mr. Neumann have started cutting costs and have moved to shut down or sell some divisions and assets, including a private school in Manhattan.
But that may not be enough to stabilize the business. SoftBank may also have to start shutting down WeWork’s least profitable spaces and lay off large numbers of employees. The company employed more than 12,500 people at the end of June.