WeWork’s Imperiled $3 Billion Stock Sale Would Mostly Benefit 5 Investors

Sarah McBride and Gillian Tan, Bloomberg News

(Bloomberg) -- In a deal that’s currently at risk of falling apart, a handful of investors would be the main beneficiaries of SoftBank Group Corp.’s plan to buy $3 billion of WeWork stock, according to a person familiar with the matter.

As part of the agreement, scheduled to be completed next week, $2.1 billion in proceeds from stock purchases is slated go to five investors, according to the person, who asked not to be identified discussing private information. Benchmark, the venture capital firm that backed WeWork from its earliest days, is seeking to sell up to $600 million worth of shares, said the person, who asked not to be identified discussing private information. That figure puts Benchmark behind only Adam Neumann, WeWork’s co-founder and former chief executive officer, who has the right to sell as much as $970 million in the deal.

Representatives for Benchmark and Neumann didn’t immediately respond to requests for comment. WeWork declined to comment.

SoftBank, the biggest investor of WeWork parent We Co., has threatened to withdraw from the deal, the proceeds of which would not go to WeWork itself, but rather to its institutional investors and other shareholders. Still, if the transaction falls apart, it will have negative repercussions for the company, which would not receive $1.1 billion in debt from SoftBank.

Besides Neumann and Benchmark, other top sellers in the deal include WeWork investor T. Rowe Price Group Inc., former WeWork Chief Financial Officer Ariel Tiger, who served in the Israeli military with Neumann and another venture capital firm, the person said. A spokesman for T. Rowe Price declined to comment. Tiger did not immediately respond to a request for comment.

“SoftBank remains fully committed to WeWork’s success as its largest shareholder and is proud of the tremendous progress the company has made over the past six months,” a spokesman for SoftBank said in a statement.

SoftBank’s stock buyback was scheduled to close April 1, but the Japanese conglomerate has said that it is not obligated to go through with the purchase. SoftBank has said under the terms of its original agreement, it could withdraw from the offer if certain conditions weren’t met, and that unresolved government investigations into WeWork qualify. Two board members disputed that assertion.

SoftBank agreed to the rescue package for WeWork in October, shortly after the company’s plans for an initial public offering dramatically unraveled. SoftBank said it has provided $13.4 billion to WeWork, including $5 billion in working capital since October, and is honoring its obligations as laid out in the agreement.

A special committee of WeWork board members has said that it is weighing options including legal action if SoftBank does not follow through with the purchase. That committee has two members: Benchmark’s Bruce Dunlevie and independent director Lew Frankfort. A representative for the committee declined to comment.

Other investors slated to sell a large amount of WeWork stock to SoftBank in the deal include JPMorgan Chase & Co., Goldman Sachs Group Inc., Jefferies and Fidelity Investments, according to two people with knowledge of the matter. Spokespeople for JPMorgan and Fidelity declined to comment. Representatives for the other investors did not immediately respond to requests for comment.

Less than 10% of the proceeds from the stock buyback would go to WeWork employees, SoftBank has said. Many employees repriced their stock options and thus aren’t part of this stage of the tender offer.