The Strategist

WeWork co-founder gets $500M from SoftBank

02/25/2021 - 02:56

Adam Neumann, the former CEO of the co-working network WeWork, may receive $500m from the company's current owner, SoftBank. The parties want to settle and avoid a lawsuit over the company's shares. SoftBank needs it to take WeWork public, and Neumann needs it to avoid being left with nothing if the court sides with the Japanese company.

Ajay Suresh
Ajay Suresh
WeWork co-founder and former CEO Adam Neumann is in talks with SoftBank to pay him $500 million, The Wall Street Journal has learned. Neumann and other investors are discussing a sale of their shares, which they agreed to back in 2019. The parties now want to enter into a pre-trial agreement, WSJ sources claim.

SoftBank is willing to spend a total of $1.5bn on WeWork shares, which includes $500m for Neumann, the newspaper's sources say. The shares are being negotiated at 2019 prices, as agreed, but the volume of shares has halved. Negotiations are difficult and it is not yet certain that an agreement will be reached, WSJ's sources said.

SoftBank had originally intended to buy shares in Neumann and other co-owners of WeWork for $3 billion. The same agreement implied a "golden parachute" for Neumann - a $185 million contract for consultant services. Neumann then resigned as CEO of the startup under pressure. But in April 2020, at the height of the coronavirus pandemic, SoftBank declined to complete the share purchase. Neumann and other shareholders then sued, with proceedings due to begin in March 2021. At the same time, SoftBank stopped "advisory" payments to Neumann.

Both parties benefit from the pre-trial settlement, according to the WSJ text. For Neumann, it is an opportunity to avoid the risk of being left with nothing if SoftBank wins the lawsuit. For Japan's Masayoshi Son, the settlement will help pave the way for a public offering of WeWork. The first attempt in 2019 failed: the company's financial problems surfaced during preparations and its valuation deflated from $47bn at its peak to $2.9bn in May 2020, when a pandemic and quarantine hit the company again. A new listing would help raise money for WeWork, the WSJ explained.