WeWork co-founder and former CEO Adam Neumann will get an additional $ 50 million and other benefits as part of a deal that would resolve a bitter dispute he and other early investors in the shared office space provider have fought with SoftBank. Group Corp., according to people familiar with the matter.
As The Wall Street Journal reported earlier this week, the parties are closing in on a deal in which SoftBank, WeWork’s majority shareholder, would buy about $ 1.5 billion worth of shares from other investors, including nearly $ 500 million of Neumann. That’s about half of what I was planning to buy previously.
But part of the deal that wasn’t previously reported sets Neumann apart from other shareholders. He asks SoftBank to give the 41-year-old the special payment of $ 50 million and extend for five years a loan of $ 430 million that it granted him in late 2019, the people said. SoftBank is also scheduled to pay $ 50 million for Mr. Neumann’s legal fees. It is not clear how much he is paying for the legal fees of the other shareholders.
The agreement between SoftBank, Neumann and the other shareholders is not final and the terms could still change, the people warned. If the parties reached an agreement, possibly in the next few days, a trial would be avoided 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, people familiar with the discussions said. While the talks could still unravel and other options are being considered, WeWork and BowX could reach an agreement next week, some of the people said.
The month-long legal skirmish centers on a pledge SoftBank made in October 2019 to buy $ 3 billion worth of shares from WeWork’s existing shareholders, including nearly $ 1 billion from Mr. Neumann. SoftBank, which was bailing out a shaky WeWork after the collapse of its planned initial public offering, also agreed to pay a four-year, $ 185 million consulting fee to Neumann, who agreed to resign as president and CEO. In addition, he loaned him nearly $ 500 million to refinance another loan.
The additional payment to Mr. Neumann could reopen old wounds with WeWork employees and investors, who were furious when the $ 185 million payment was made public.
Employees to whom Mr. Neumann had long preached an “us over me” spirit were stunned by the contrast between their exit package and their personal financial situation. Most had stock options that had become virtually worthless when WeWork’s value plummeted to around $ 8 billion from $ 47 billion.
Neumann never received the full amount of the consulting contract, the people said: SoftBank paid him about $ 130 million before stopping payment amid the legal fight.
Last April, when the coronavirus pandemic swept the US, SoftBank refused to go ahead with the $ 3 billion payment. He cited the terms of the deal that he said had not been completed, including the restructuring of a subsidiary in China. WeWork shareholders, represented by early WeWork investors on the board, and Neumann filed separate lawsuits, and the parties negotiated legal motions for much of the past year.
The nearly $ 500 million in stock Neumann will sell represents approximately 25% of his shares. The price per share you’re getting is roughly the same as in the previous deal, people familiar with the matter said.
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It appeared in the print edition of February 25, 2021 as ‘WeWork Ex-Boss to Get Windfall’.