WeWork co-founder and former CEO Adam Neumann is expected to raise an additional $ 50 million in addition to other benefits as part of his contract with SoftBank Group Corp.
People familiar with the matter say the deal sets Neumann apart from other WeWork shareholders, reports the Wall Street Journal.
The agreement provides for SoftBank to pay the $ 50 million payment to the 41-year-old man and also extend a $ 430 million loan it gave him in late 2019 for five years, according to sources familiar with the matter.
In addition, Neumann’s $ 50 million in attorney fees will also be paid by SoftBank. Currently, it is not known how much SoftBank will pay in legal fees to other shareholders.
That would cause Neumann to receive a cut of almost $ 500 million in his payment from the new owner of the shared office company, SoftBank, who would buy back some of his shares.
Japan’s SoftBank Group CEO Masayoshi Son led the technology group’s offer for WeWork
The terms of the agreement may still change, sources told the WSJ. But if the deal is closed in the next few days, the parties can avoid the trial in early March.
The original terms of the offer would have made SoftBank buy $ 1 billion of Neumann’s shares in WeWork, but now that deal has been halved to just $ 500 million.
The high-profile deal would put an end to a protracted legal battle between Neumann and the technology company, which dates back to 2019, when WeWork’s IPO plans failed.
This would also make it clear to WeWork, as it seeks negotiations to go public through a merger with a special purpose acquisition company (SPAC).
WeWork co-founder and former CEO, Adam Neumann, in the photo, is in advanced talks to resolve a high-profile legal dispute with SoftBank Group Corp.
SoftBank, which poured more than $ 13.5 billion into WeWork, was pulled into a legal dispute with company directors after dropping an agreed $ 3 billion offer when it bailed out the office-sharing company after a failed attempt of IPO.
In October 2019, SoftBank agreed to buy around $ 3 billion in WeWork shares owned by Neumann, as well as current and former WeWork employees. Subsequently, SoftBank challenged its obligation to buy the shares.
Under the proposed new terms, SoftBank would spend about $ 1.5 billion to buy shares of WeWork’s first investors and employees, including $ 500 million to buy Neumann shares.
The purchase of the shares would be about half the number she originally agreed to buy.
The negotiations were previously reported by the Wall Street Journal. SoftBank declined to comment. WeWork was not immediately available for comment, the website said.
Neumann was once seen as a star in the business world after WeWork’s annual revenue soared to $ 1 billion.
The company provides shared offices, internet connection, cleaning service and reception, which makes it popular with small businesses and technology startups.
WeWork spent months in 2019 preparing for an initial public offering after receiving a $ 47 billion valuation, but ended up having to discard the money as the company lost money and estimates of its value have dropped by tens of billions of dollars.
Neumann stepped down as CEO of WeWork after the failure to launch an IPO
The company told shareholders that it had lost nearly $ 1.3 billion in the third quarter of 2019, before WeWork was finally bought by SoftBank for more than $ 10 billion.
The company later announced that it was laying off about 2,400 employees worldwide, about a fifth of its workforce.
After WeWork’s attempt to go public was hampered by issues of corporate governance and massive continuing losses, Neumann left WeWork’s board of directors with what was described at the time as a $ 1.7 billion exit package, having voted to remove himself at the decisive meeting.
A source said Neumann would receive $ 1 billion for shares, $ 500 million for personal debt repayments and $ 185 million in consulting fees.
However, SoftBank said in April 2020 that it would not proceed with the $ 3 billion offer to shareholders.
Questions also arose about Neumann’s lifestyle and eccentric methods of corporate governance, including his ownership of some of the company’s rental properties.
Neumann’s former chief of staff, Medina Bardhi, accused him and the company of discrimination, saying she feared for the health of her unborn baby because of Neumann’s tendency to smoke marijuana on chartered planes.
She also said she was replaced by a man who earned more than double her salary when she took maternity leave. WeWork said it would challenge the claims.
A new book released last October also detailed Neumann’s alcohol-driven antics as head of the troubled start-up.
In August 2018, he gave himself a supply of alcohol that “could have covered most of WeWork’s basic salary” during a luxurious company retreat, according to Billion Dollar Loser: The Epic Rise and Fall of WeWork by Reeves Wiedeman.
The three-day retreat near London included a presentation by Lorde and motivational speeches by Deepak Chopra, wrote Wiedeman.
While all the other participants slept on an air mattress in a tent, Neumann and his wife, Rebekah, slept in a ‘tent house suite’ with air conditioning and heating, a king-size bed and four single beds, several refrigerators, fireplaces and eight picnic tables.
Marcelo Claure (above), who took over as CEO of WeWork after Neumann left under pressure from investors last year, said Neumann’s original lucrative deal was denied
WeWork’s current chief executive, Marcelo Claure, told the Financial Times last year that the company should have positive cash flow during the fourth quarter of 2021.
Claure said the demand for small, flexible offices has increased since the coronavirus pandemic and the resulting economic crisis.
“For WeWork to be profitable, we need to exceed 67% to 68% occupancy and, before the pandemic, we were 80% to 85% occupancy, so all we need to do is go back to similar occupancy levels,” he said .
Some tenants refused to pay rent during the pandemic, but Claure said Mastercard, ByteDance, Microsoft and Citigroup recently signed lease agreements with WeWork.