SoftBank is looking to develop stricter regulations for startups in the wake of the near collapse of WeWork. Sources have said the Japanese powerhouse is expected to reveal its new standards and restrictions on dual-class share structures this week, which will apply to future investments made by SoftBank.
The move comes after SoftBank was forced to extend a lifeline of up to $8 billion to WeWork. The office space and workspace solutions firm put its initial public offering (IPO) on hold after it came under scrutiny by both investors and analysts over its governance, as well as for payments made to Co-founder and CEO Adam Neumann, and its use of a complicated corporate structure.
Masayoshi Son, chairman and CEO of SoftBank, said in a statement, “SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work. WeWork is at the forefront of this revolution. It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced.”
As a result, SoftBank’s Vision Fund is looking to devise a low-risk investment strategy, with current and former executives saying it will look toward portfolio companies. A team led by Robert Townsend, SoftBank’s chief legal officer, has been working on the new guidelines, which would include having at least one board seat when investing with private companies.
The startup regulations would also require at least one independent director, preventing directors from owning super-voting shares, and limiting founders or management to less than half of the board seats. There will be guidelines on how much a founder’s stakes can be sold at the time when a startup goes public, as well as a chief executive succession plan that is approved by a majority of directors.
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