Airbnb is reportedly paying a steep 10% interest on the debt it just raised in its $1 billion funding and its valuation is nearly half what it was in 2017
Airbnb will pay more than 10% in interest on the additional funding it just secured from Silver Lake and Sixth Street Partners, The Wall Street Journal reported Tuesday. The investors were also offered warrants that can convert into stock based on a valuation of $18 billion, a significant drop from Airbnb's previous valuation of $31 billion, according to The Wall Street Journal. Airbnb announced Monday that it had raised $1 billion in debt and equity, but the deal terms had not been previously reported. Airbnb's latest funding deal raises its cash reserves to $4 billion, according to Reuters, and comes as the company's business has been hit hard by the coronavirus. Visit Business Insider's homepage for more stories.
Airbnb has agreed to pay more than 10% in interest on the additional funding it recently raised and will offer its new investors warrants that value the company at $18 billion, The Wall Street Journal reported Tuesday. Airbnb announced Monday that it had raised $1 billion in debt and equity from Silver Lake and Sixth Street Partners, but it did not disclose the terms of the deal. The company is paying a steep 10% in interest plus a benchmark rate called the London Interbank Offered Rate (LIBOR), which will amount to more than $100 million per year, The Wall Street Journal reported. By comparison, so-called junk bonds are yielding roughly 10% as investors dump riskier assets. The investors were also offered warrants that can convert into shares of Airbnb based on a valuation of $18 billion, according to the The Wall Street Journal. That's a drop of nearly 50% since Airbnb's last private valuation of $31 billion in 2017, according to PitchBook, and less than the $26 billion internal valuation the company reportedly reached last week. Airbnb has been hit hard by the coronavirus pandemic, which has all but halted travel globally, and was reportedly losing money even before the pandemic — which could delay the company's plans to go public this year. Reuters reported Tuesday that the deal will raise Airbnb's cash reserves to $4 billion and that the company is exploring a potential new line of credit worth up to $1 billion. Silver Lake is aiming for a valuation of $40 billion to $50 billion for Airbnb in order to meet its return target, according to Reuters. "We made this investment because we believe in Airbnb's leadership, beginning with Brian, and look forward to partnering with them in our role as a strategic investor," a Silver Lake spokesperson told The Wall Street Journal. Airbnb and Sixth Street Partners declined to comment on the The Wall Street Journal's reporting or any terms of the deal.SEE ALSO: Airbnb could run out of cash in one year, even with the $1 billion it just raised, because of how devastating the coronavirus is on its business Join the conversation about this story » NOW WATCH: Jeff Bezos reportedly just spent $165 million on a Beverly Hills estate — here are all the ways the world's richest man makes and spends his money
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WeWork's chairman said Adam Neumann 'may have violated' the terms of his $185 million consulting contract with his former company, and that it's is no longer in effect
Summary List Placement When WeWork co-founder Adam Neumann stepped down as CEO last September amid a...Summary List Placement When WeWork co-founder Adam Neumann stepped down as CEO last September amid a string of controversies, he landed a massive exit package from WeWork investor SoftBank, which took over the embattled company, that included a $185 million consulting deal. But Neumann may have invalidated that contract after he "may have violated" its terms, WeWork executive chairman Marcelo Claure suggested Monday during a virtual event hosted by The Wall Street Journal. "I don't think that consulting agreement is still in force," Claure said, according to The Wall Street Journal, adding: "I think Adam may have violated some of the parts of the consulting agreement, so that's no longer in effect." Claure, who is also the COO, executive vice president, and a board director at SoftBank, didn't say which terms Neumann allegedly breached because it relates to an ongoing lawsuit over Neumann's exit package, but added that the former WeWork CEO and chairman had been "incredibly helpful" when SoftBank stepped in to rescue WeWork, The Wall Street Journal reported. WeWork, SoftBank, and a spokesperson for Neumann did not respond to requests for comment on this story. Neumann's exit package also included the option to sell up to $970 million of WeWork stock to SoftBank as well as a $500 million credit line, but Neumann sued the Japanese bank in May for backing out of the stock purchase agreement, claiming that SoftBank and Claure amended the deal without his permission in late December. Read more:Adam Neumann sues SoftBank for backing out of buying nearly $1 billion of his WeWork shares, saying the investor changed up the terms and he didn't sign off SoftBank took the reins of WeWork in October 2019 following Neumann's failed attempt to take the company public in a deal that involved Neumann's resignation, a fresh $5 billion investment, buying back up to $3 billion of stock, and acquiring around 80% of the real estate startup. WeWork, only months before privately valued at $47 billion, had seen its valuation plummet more than 80% amid multiple controversies surrounding its finances, governance, and a toxic culture fueled by Neumann's leadership style.Join the conversation about this story » NOW WATCH: How NASA strategically paints its vehicles for space
Airbnb CEO Brian Chesky told employees that the company is resuming preparations for an IPO, The...Airbnb CEO Brian Chesky told employees that the company is resuming preparations for an IPO, The New York Times first reported Wednesday and Business Insider confirmed. The company has said that it intends to go public sometime this year, but Bloomberg reported that the timeline could be pushed to 2021 as a result of the coronavirus pandemic. Airbnb, which was reportedly losing money even before the pandemic, saw business plummet as travel ground to a halt. But the company is also under pressure to go public from employees whose stock options could start expiring soon. Visit Business Insider's homepage for more stories. Despite taking a major hit to its business during the pandemic, Airbnb is once again gearing up to go public, The New York Times first reported Wednesday and Business Insider confirmed. "This is something I never would have imagined telling you," CEO Brian Chesky told employees, according to The Times. Airbnb has said since last fall that it intends to go public sometime "during 2020," but Bloomberg reported in March that the company might push its target date back to next year due to coronavirus fears and massive economic fallout. At the time, Airbnb's urban bookings had dropped as much as 96% in some cities since the virus halted global travel, and the Financial Times reported in early April that Airbnb had slashed its internal valuation to $26 billion — a 16% drop from the company's previous valuation of $31 billion, according to PitchBook. In May, the company cut its workforce by 25% — 1,900 jobs — in an attempt to cut costs. Airbnb has shown some small signs of a rebound since then, reporting in June that bookings had surged as some travel resumed, but still has a long road to recovery — let alone profitability, with The Wall Street Journal reporting in April that Airbnb lost $674 million in 2019. Airbnb is also under pressure from employees, with The New York Times reporting last year that some could see stock options expire starting this November if the company doesn't go public by then. But with COVID-19 cases surging again in many states, the realities of the pandemic could still hold Airbnb back. "We're not committing to going public this year, but we're not ruling it out, either," Chesky told employees following the meeting in an email seen by Business Insider. "When the market is ready, we will be ready, because Airbnb was down but we were not out."Join the conversation about this story » NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America
Warren Buffett plowed $3 billion into General Electric during the financial crisis. Here's the story of how he helped the industrial titan.
Warren Buffett plowed $3 billion into General Electric during the financial crisis, when the industrials giant's...Warren Buffett plowed $3 billion into General Electric during the financial crisis, when the industrials giant's financing arm was suffering from the credit crunch. In exchange, Buffett received $3 billion in preferred stock paying a 10% annual dividend, plus warrants to buy $3 billion in common stock at a fixed price in the future. Buffett's Berkshire Hathaway raked in about $1.5 billion from the deal, but the famed investor revealed years later that he could have made more. "We actually didn't push it to the limit because there really wasn't anybody else around." Visit Business Insider's homepage for more stories. Warren Buffett invested $3 billion in General Electric in October 2008, handing vital cash to the industrial titan just as credit markets seized up and global demand slumped. Weathering the storm GE CEO Jeff Immelt had issued a profit warning in late September, citing "unprecedented weakness and volatility in the financial services markets." The credit crunch was especially bad news for GE Capital, the group's massive financing division that loaned money to consumers and businesses. Immelt cut the dividend that GE Capital paid to headquarters, halted share buybacks, and put further borrowing plans on hold. He also moved up his goal to reduce GE's reliance on financing profits to the end of 2009. GE's stock price had plunged by roughly a third since the start of 2008. However, its market capitalization was still more than $245 billion, making it the country's second-most valuable public company after Exxon. Read more: Jefferies created a 6-step process for finding companies that will keep paying strong dividends — and landed on these 20 global stocks as 'rock-solid' picks Faced with the monumental challenge of reshaping GE and riding out a brutal downturn, Immelt and his team decided they could use a "rainy-day fund" or a "backup to a backup," The Wall Street Journal reported at the time. Days after Buffett agreed to plow $5 billion into Goldman Sachs, Immelt contacted the Berkshire Hathaway boss to propose a similar deal, The Journal said. The pair shook hands on Berkshire investing $3 billion in GE in exchange for preferred stock paying a 10% annual dividend. GE would be allowed to redeem the shares at a 10% premium after three years. The investor also secured warrants enabling Berkshire to purchase 135 million of GE's common shares for $22.25 each — close to its stock price at the time — at any point in the next five years. 'Insurance is expensive, especially when you buy it from Warren Buffett' GE accepted Buffett's terms because the famed investor provided more than money; his backing was also a vote of confidence in its future. "GE is the symbol of American business to the world," Buffett said in the press release announcing the deal. "I am confident that GE will continue to be successful in the years to come." Immelt added that Buffett's cash, plus at least $12 billion from a public stock offering, would boost GE's flexibility, help it execute its plans faster, and allow it to "play offense in this market should conditions allow." Read more: A 30-year market veteran explains why we're in 'one of the nutsiest bubbles in the history of bubbledom' — and warns of an 'underwater' economy for the next several years GE's shareholders recognized Buffett's money was a useful cushion for the company. "It's an insurance policy in case things get worse," fund manager Wayne Titche told The Journal at the time. "In today's market, better safe than sorry." However, they still balked at the high interest rate and bemoaned the dilution of existing investors' shares. "Insurance is expensive, especially when you buy it from Warren Buffett," shareholder Arthur Rice told the newspaper. Buffett trumpeted the GE deal, as well as similar bets on Goldman Sachs and Wrigley, in his 2008 letter to shareholders. "We very much like these commitments, which carry high current yields that, in themselves, make the investments more than satisfactory," he said. In all three cases, Berkshire acquired "substantial equity participation as a bonus," he added. Buffett raked in $1.5 billion — and could have made more Berkshire received $3.3 billion when GE redeemed its preferred stock in October 2011, as well as $900 million in dividends in the intervening three years. The pair also amended Berkshire's warrants in 2013 to allow the conglomerate to exercise them without spending any cash. It received 10.7 million shares as a result, which it eventually sold them for about $315 million in 2017. Between the $300 million premium, the dividends, and the proceeds from the share sales, Berkshire raked in about $1.5 billion in profit or a 50% return. Read more: Famed investor Jim Rogers earned a 4,200% return with George Soros. He explains why the US response to COVID-19 is 'embarrassing' — and breaks down 4 purchases he's made amid the fallout. Moreover, Buffett revealed at Berkshire's annual meeting in 2018 — almost a decade after the deal — that he could have driven a harder bargain, but cut GE some slack given the extraordinary circumstances. "They were going to take the terms we offered," he said, according to a transcript on Sentieo, a financial-research site. "But we actually didn't push it to the limit because there really wasn't anybody else around."Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid