- During SoftBank's earnings conference, CEO Masayoshi Son laid out a "simple" three-step plan that he said will right the ship at WeWork.
- WeWork has to halt construction of new buildings for some time, cut costs and exit unprofitable side businesses in order to become profitable, Son said.
SoftBank CEO Masayoshi Son says he has devised a "simple formula" to turn around troubled co-working start-up WeWork.
Son laid out a three-step plan that he said will right the ship during an earnings conference on Wednesday, in which the Japanese conglomerate reported its first quarterly loss in 14 years. According to Son, WeWork must stop building offices for roughly three to four years, since construction requires significant upfront investments. The company also has to cut costs and "terminate" side businesses that aren't profitable by either selling or closing them.
Those changes, combined with increasing gross profits and reducing operating expenses, are the "simple turnaround that we will be aiming for," Son said. Son doubled down on this sentiment by sharing a series of charts that show just how swift WeWork's comeback could be, in his view.
But boy are the charts bizarre, containing almost no real data and a bunch of line graphs shooting up and to the right. (They've also been widely mocked on Twitter.)
Take a look for yourself.
Son summarized SoftBank's current setbacks in this slide:
Son also acknowledged that WeWork's business is currently "in the red:"
But WeWork's turnaround story is "simple," he said, according to this chart:
It all comes down to a three-step formula that involves increasing gross profits and reducing operating expenses:
WeWork was poised to run out of cash without the eleventh-hour bailout deal from SoftBank. WeWork's IPO prospectus, released in August, provided a picture of the cash-strapped company's finances, including a $900 million loss in the first six months of 2019 and long-term lease obligations of $17.9 billion. The company ultimately postponed its IPO.
Despite WeWork's mounting losses and questionable valuation, SoftBank continued to plow money into the start-up. Son admitted at the earnings conference that he had turned "a blind eye" to some of WeWork's problems, including its controversial former CEO Adam Neumann, who stepped down in September. He said he was attracted to Neumann's "energetic and passionate" nature and WeWork's hip offices.
"Well, [Neumann] had good side and bad side to be honest," Son said. "And his good sides, I think we – well, I overestimated Adam's good side, which I should have known better. And his negative side, in many cases, I turned a blind eye, especially when it comes to governance."