NEW YORK — WeWork has agreed to be taken over by its largest outside investor, SoftBank, three people with knowledge of the matter said, in a deal that provides a lifeline for the troubled shared office space company after it pulled its initial public offering and removed its chief executive.
SoftBank, which has invested about $10.5 billion in WeWork, will now offer to lend the company $5 billion and buy up to $3 billion in shares from other investors, these people said. Once the deal closes, SoftBank will need to quickly cut costs and stabilize the business.
The sale marks a humbling moment for WeWork and SoftBank. It values the company at just $7 billion, down from the $47 billion that SoftBank reckoned it was worth in January, these people said.
Just a few weeks earlier, WeWork had been planning to sell shares to stock investors in what its investment banks had billed as one of the biggest initial public offerings in recent years. But that share sale was scrapped last month after Wall Street investors balked at the company’s huge losses and unusual corporate governance structure.
WeWork’s board chose the SoftBank deal over a $5 billion debt financing offer from JPMorgan Chase.
The SoftBank deal will mean a possible huge payout for Adam Neumann, WeWork’s cofounder who stepped down as chief executive last month, under pressure from shareholders — including SoftBank — who grew skeptical of his leadership as the IPO started falling apart.
Neumann owns about 30 percent of the company and could sell up to $1 billion in shares to SoftBank.
Neumann will also give up special shares that gave him control of the company, back the deal, leave the WeWork board, and become a consultant to SoftBank for four years, these people said. SoftBank will pay him $185 million for his advice, and Neumann will be barred from starting another company or poaching employees from WeWork.
WeWork has considerable holdings in Boston — about 1.5 million square feet in 18 buildings.
The Wall Street Journal previously reported some of the terms of the deal.