WeWork co-founder and former Chief Executive Adam Neumann will reap an additional $ 50 million windfall and other benefits as part of an agreement that would settle a bitter dispute he and other early investors fought in the shared office space provider with SoftBank Group Corp., according to people familiar with the case.
As The Wall Street Journal reported earlier this week, the parties are in a deal whereby SoftBank, WeWork’s majority shareholder, would buy approximately $ 1.5 billion in shares from other investors, including nearly $ 500 million from Mr. Neumann. That’s about half the amount you previously planned to buy.
But part of the deal that has not been previously reported sets Mr. Neumann apart from other shareholders. It is calling on SoftBank to give the 41-year-old the $ 50 million special payout and extend a $ 430 million loan to him for five years in late 2019, people said. SoftBank is also scheduled to pay $ 50 million for Mr. Neumann’s legal fees. It is not clear how much it will pay for the legal costs of the other shareholders.
The settlement between SoftBank, Mr. Neumann and the other shareholders is not final and the terms may change, the people warned. Should the parties reach an agreement, possibly in the coming days, a trial from early March would be avoided.
WeWork is separately negotiating a combination with a specialty acquisition company called BowX Acquisition Corp. that the startup would list publicly, said people familiar with the discussions. While the talks may still fall apart and other options are being considered, WeWork and BowX could reach an agreement next week, some of the people said.
The months-long legal skirmish revolves around a commitment SoftBank made in October 2019 to buy $ 3 billion in stock from existing WeWork shareholders, including nearly $ 1 billion from Mr. Neumann. SoftBank, which rescued a faltering WeWork after its planned IPO collapsed, also agreed to pay $ 185 million in advisory fees for four years to Mr. Neumann, who agreed to step down as chairman and CEO. In addition, it lent him nearly $ 500 million to refinance one more loan.
The additional payment to Mr. Neumann could reopen old wounds on WeWork employees and investors, who were outraged when the $ 185 million payout went public.
Employees to whom Mr. Neumann had long preached a ‘we over me’ ethos were stunned by the contrast between his exit package and their personal financial situation. Most had stock options that had become virtually worthless when WeWork’s value plummeted from $ 47 billion to about $ 8 billion.
Mr. Neumann never received the full amount of the advisory contract, people said: SoftBank paid him about $ 130 million before stopping payment amid the legal battle.
Last April, as the coronavirus pandemic engulfed the US, SoftBank declined to proceed with the $ 3 billion payment. It quoted the terms of the deal that it said had not been finalized, including the restructuring of a subsidiary in China. WeWork shareholders, represented by early WeWork investors on the board, and Mr. Neumann have filed separate lawsuits, and the parties have been exchanging legal motions for much of the past year.
The nearly $ 500 million that Mr. Neumann has in stock represents approximately 25% of his assets. The price per share he gets is about the same as in the earlier agreement, people familiar with the matter said.
Write to Maureen Farrell at [email protected] and Eliot Brown at [email protected]
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Appeared in the February 25, 2021 print edition as ‘WeWork Ex-Boss to Get Windfall’.