WeWork co-founder and former CEO Adam Neumann is expected to reap an extra $ 50 million and other benefits as part of a deal that would resolve a close dispute that he and other early investors in the shared office space provider have waged with SoftBank Group Corp., according to people familiar with the matter.
As The Wall Street Journal reported earlier this week, the parties are closing a deal in which WeBork’s majority shareholder SoftBank would buy about $ 1.5 billion in shares from other investors, including nearly $ 500 million in Neumann. This is about half of what I planned to buy earlier.
But part of the previously unreported deal differentiates Neumann from other shareholders. He asks SoftBank to give the 41-year-old businessman the $ 50 million special payment and extend a $ 430 million loan that he made him in late 2019 for five years, people said. SoftBank is also scheduled to pay $ 50 million for Neumann’s legal fees. It is unclear how much he is paying for the other shareholders’ attorney fees.
The agreement between SoftBank, Neumann and the other shareholders is not final and the terms may still change, people warned. Should the parties reach an agreement, potentially in the next few days, it would avoid a trial in early March.
WeWork is separately negotiating a combination with a special purpose acquisition company called BowX Acquisition Corp. that would provide the startup with a public listing, said people familiar with the discussions. While negotiations may still fail and other options are being considered, WeWork and BowX could reach an agreement as early as next week, some people said.
The month-long legal skirmish centers on a commitment that SoftBank made in October 2019 to buy $ 3 billion in shares from existing WeWork shareholders, including nearly $ 1 billion from Mr. Neumann. SoftBank, which was rescuing a fluctuating WeWork after the collapse of its planned IPO, also agreed to pay Neumann a $ 185 million four-year consulting fee, which agreed to step down as president and CEO. In addition, it lent him nearly $ 500 million to refinance another loan.
The extra payment for Neumann could reopen old wounds with WeWork employees and investors, who were furious when the $ 185 million payment went public.
The employees to whom Neumann had long preached an “us about me” ethos were surprised by the contrast between his departure package and his personal financial situation. Most had stock options that had become virtually worthless, as WeWork’s value plummeted from $ 47 billion to about $ 8 billion.
Neumann never received the full amount of the consultancy contract, people said: SoftBank paid him about $ 130 million before interrupting payment in the middle of a legal dispute.
Last April, when the coronavirus pandemic swept the United States, SoftBank refused to proceed with the $ 3 billion payment. She cited the terms of the deal she said was not completed, including the restructuring of a subsidiary in China. WeWork shareholders, represented by WeWork’s first investors on the board, and Mr. Neumann filed separate lawsuits, and the sides negotiated legal motions for much of last year.
The nearly $ 500 million in shares Neumann is expected to sell represent about 25% of his holdings. The price per share he is getting is almost the same as the previous deal, people familiar with the matter said.
Write to Maureen Farrell at [email protected] and Eliot Brown at [email protected]
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Published February 25, 2021, print edition as ‘WeWork Ex-Boss to Get Windfall.’