Market Thinking

making sense of the narrative

(Really) Won’t Work

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A few days away meant a bit slow in the update on Won’t Work, but news that Adam Neuman has stepped down as CEO yesterday and that he had extracted over $700m in share sales and loans before the (now postponed) IPO just adds to this slow motion car crash of a story. In the meantime, I notice that Goldman Sachs are trying to offload some of their financial obligations to Softbank Vision Fund which of course is the main (only?) backer of We Work, by trying to sell on some of the $3.1bn liquidity financing deal they have. https://www.businesstimes.com.sg/garage/goldman-cutting-its-loan-exposure-to-softbank-vision-fund-sources

We Work itself has a lot of finance lines in place, but they are conditional on a successful IPO such that they are likely to be forced to return to the Softbank Vision Fund for more money. Given that the Vision Fund’s biggest backer is the Saudi Investment Fund and they are hardly having a good few weeks either at the moment, we could be looking at a very nasty liquidity crunch.

Perhaps not surprisingly Softbank’s CDS spreads have widened sharply and it’s share price has broken down. When the only buyer in town runs out of liquidity, the things they are buying need to reprice to the next realistic buyer. If they switch from buyer to seller, that gap can be very uncomfortable

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