The Son cost fallacy

26 September 2019 By Liam Proud, Robert Cyran Follow @liamwardproud

CEO Masayoshi Son may pour an extra $1 bln into the cash-burning shared-office firm. It’s tempting to imagine this means WeWork’s business just needs more cash and patience. The reality is that SoftBank has more to lose from walking away than a regular investor might.

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SoftBank is planning to pump an extra $1 billion or more into WeWork parent The We Company by renegotiating a warrant agreement struck before its delayed initial public offering, the Financial Times reported on Sept. 26.

The plan would increase the Japanese firm's initially planned investment of $1.5 billion in WeWork as part of the agreement, giving the U.S. company the right to receive the money in April next year in exchange for Class A common stock.

The potential new investment from SoftBank could unlock more financing options for WeWork, which is in talks for a $3 billion to $4 billion loan from a consortium of banks contingent on it raising additional capital.

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