Marcelo Claure said WeWork’s new plan for profitability makes the firm a good investment for SoftBank, but investors still have questions.
During an interview with Andrew Ross Sorkin on CNBC, the WeWork executive chairman spoke about the beleaguered office-leasing firm’s future after a series of leadership changes at WeWork and its main investor SoftBank. Claure, executive chairman of the co-working giant, said that in 100 days WeWork had put together a five-year plan to achieve profitability on an EBITDA basis in 2021 and positive cash flow the following year.
Last year, WeWork’s $47 billion valuation plummeted to $8 billion after a botched public offering, raising broader questions about inflated valuations of tech companies. The company had acknowledged in its IPO prospectus that profitability was not in its foreseeable future and it later reported losing $1.25 billion in the third quarter. Critics have said that WeWork should be valued as a real estate firm, not a tech firm, as it is in the business of leasing office space and re-leasing to tenants at a premium.
“WeWork is a combination of technology and great buildings with great design,” Claure said. “But we can never say it’s not a real estate business.”
Earlier this month, WeWork hired Sandeep Mathrani to be its CEO, bolstering the notion that the company is indeed a real estate firm. Mathrani, who will start Feb. 18, is a former Brookfield executive and veteran of the real estate industry.
Much of the criticism lobbed at WeWork focused on its eccentric and problematic ex-CEO, Adam Neumann. Since his departure, Claure said the two “rarely” speak. According to Claure, Neumann is excited that WeWork is transitioning from a high-growth business to one with “more accountability.”
But when asked about Neumann’s $1 billion-plus exit package, Claure said that because of SoftBank’s tender offer, the WeWork founder would have the same opportunity as any other shareholder to sell his shares.
“To say that he has walked away with over a billion dollars is totally false,” he said.
A recent report by the Financial Times revealed that Neumann owns millions of “profit interests” in WeWork, so if the firm went public, his $1.7 billion exit package could grow in value to more than $2 billion.
SoftBank’s Vision Fund 2, which aims to raise even more than its first, has faced criticism because much of the $108 billion capital is from SoftBank itself rather than outside investors. But according to Claure, the fund is performing well, and Masayoshi Son, despite admitting past investment mistakes, has never sought “growth at any cost.”
“After you get away from the media reports, the fund is performing well,” Claure said. “Uber was a good investment. WeWork has a plan. We are long-term thinkers.”
SoftBank is going through its own shakeup at the moment. Hedge fund Elliott Management, led by activist investor Paul Singer, has quietly amassed a $2.5 billion stake in SoftBank. The news of the stake, reported last week by the Wall Street Journal, sent SoftBank shares up 7 percent in Tokyo.
Last week, Elliott Management said it was working with SoftBank’s leadership to make changes, as the firm believes SoftBank is undervalued. Claure fired back at the suggestion that Singer would take an outsized role in decision-making at SoftBank. At least three SoftBank executives had recently left or were negotiating to leave the firm as of last week.
“We have our own activist, [SoftBank founder and CEO] Masa,” Claure said. “Any shareholder that has views, SoftBank is going to listen. The management team is open. Masa is open. We’re all in the same boat.”