Adam Neumann could reap nearly $ 500 million in cash from his stakes in WeWork and emerge with a stake in a public company, less than 18 months after the failure of his initial public offering cost him his job as chief executive.
SoftBank is in advanced negotiations with the co-founder of WeWork and other shareholders to resolve a tough legal battle resulting from the rescue of the Japanese group’s office group in October 2019, which was needed to help prevent bankruptcy after the IPO collapse, people familiar with the negotiations said.
Clearing the litigation filed by Neumann and a special committee of independent directors of the group would pave the way for WeWork to be bought by a special purpose acquisition company, giving it the public quote it tried and failed in 2019.
People familiar with the matter said that BowX Acquisition, a blank check vehicle that raised $ 420 million in an IPO in August, approached SoftBank, WeWork’s largest shareholder, about a deal that could value WeWork at about $ 10 billion.
$ 47 billion
The price SoftBank put on WeWork in its last round of private financing before the failed IPO
Talks between the two groups continue and an agreement may be struck in the coming weeks, although negotiations may still fail. Resolving the legal dispute with Neumann and others has been considered critical to concluding a merger with BowX, as the new publicly traded company is expected to attract investors to its shares.
The discussed valuation would be well below the $ 47 billion price that SoftBank applied to the company in its last round of private financing before the failed IPO, which Neumann and his Wall Street bankers hoped would equal or eclipse that level.
But it would represent an unexpected recovery in Neumann’s fortunes, an endorsement of a business model that seemed threatened when the Covid-19 pandemic emptied its offices and another indication of how the Spac boom has transformed capital markets.
SoftBank reportedly approached Neumann and the special committee in the past two weeks with a proposal to resolve its dispute over a $ 3 billion offer that was part of the October 2019 redemption. The Japanese group withdrew from the deal to buy Neumann shares and other investors, saying that the conditions of the deal were not met.
The opposing sides were due to face each other in court next week because of the public offering, after an earlier judgment gave the special committee and Neumann the legitimacy to open its case against SoftBank.
The deal under discussion would result in SoftBank paying $ 1.5 billion – half the amount in dispute – to Neumann and other investors, including Benchmark Capital. Neumann would receive about $ 480 million for 25% of his holdings, instead of double the 50% he could have offered. He would also retain three-quarters of his current holdings in the publicly-held company.
WeWork downsized the team and left more than 100 open and planned locations since their fortunes changed dramatically last year. Under the leadership of Chief Executive Sandeep Mathrani, the company has cut costs dramatically, although it continues to lose money.
Negotiations continue and the exact amount Neumann and others receive may change.
BowX is led by Vivek Ranadivé and Murray Rode, two former executives at Tibco Software and supported by Bow Capital, the venture capital fund founded by Ranadivé with the support of the University of California. In listing documents last year, he said he intended to look for telecommunications, media and technology companies.
Ranadivé also owns the Sacramento Kings basketball team.
The Wall Street Journal previously reported on the settlement negotiations.