Tech

Former WeWork Chief Gargantuan Exit Package Gets New Sweetener

Almost two years ago

Softbank Group Co., Ltd.

9984 -2.20%

I tried to divide the road When WeWork co-founder Adam Neumann bailed out a shared office company. It wasn’t an easy divorce.

In February, WeWork awarded Neumann a stock bounty worth about $ 245 million, according to securities filing earlier this month. This is an unreported benefit that is inferior to other early shareholders.

The deal is part of the former CEO’s huge 2019 exit package renegotiation, ending a long-standing dispute between him and Softbank and paving the way for WeWork’s public listing. People familiar with this issue say it helps.

In addition, the final package will give him nearly $ 200 million in cash, allow him to refinance $ 432 million in favorable terms, and allow a Neumann-managed entity to sell $ 578 million in WeWork shares. I did it.

The sale of shares was open to all investors and other profits were reserved by Mr Neumann.

Filing also shows that after Neumann left the company in the fall of 2019, WeWork suffered significant losses due to the sale of many of the companies it had acquired at his direction. The first 10 investments purchased in cash and WeWork shares for $ 759 million earned only $ 164 million.

Disclosure was made as WeWork Complete the merger When

Get BowX Co., Ltd.

BOWX 0.74%

, Special acquisition company. This transaction allows the shared office company to complete its listing. A Failed attempt The initial public offering in 2019 led to Neumann’s retirement.

According to executive severance experts, the package stands out not only for its huge size, but also for Neumann’s records. The valuation of WeWork, which he co-founded in 2010, dropped to about $ 8 billion when it moved away from $ 47 billion in early 2019. WeWork has raised a total of more than $ 11 billion to set up a company worth $ 7.9 billion, excluding debt.

“To be generous is a conservative expression,” said Connor Callahan, a professor of management at the University of Illinois at Chicago, who studies retirement benefits. “It will be very angry for people.”

Indeed, this move could further sting some ex-employees. More than 90% of WeWork’s staff had stock options that were underwater when SoftBank bailed out the company in 2019. WeWork changed the price of stock options at a much lower price for stuck staff, but thousands were fired as the company shrank. option.

Unlike most executives in large corporations, it helps Neumann explain how he negotiated such abundant terms, he holds shares with ten times as many votes as regular shares. By doing so, he dominated the company. In effect, Softbank was paying him to relinquish its control, Callahan said.

Neumann’s exit negotiations date back to the fall of 2019, when the company failed its attempted IPO. WeWork, the country’s most valuable startup earlier that year, was attacked by investors worried about its huge losses, Neumann’s potential conflict of interest, and his volatile business style. I did. He resigned as CEO due to the stagnation of the IPO, but he effectively maintained control of the company given his high-voting shares and chairmanship.

A few weeks later, SoftBank prepared a plan to bail out WeWork, which was short of cash, but did not invest until Neuman relinquished control and board seats, according to SoftBank executives. After the negotiations, SoftBank agreed to pay Neuman a $ 185 million consulting fee, with the entity he manages selling $ 792 million in shares and $ 500 million related to the remaining shares. Allowed you to refinance your debt.

A few months later, SoftBank did not agree to a share purchase agreement, saying it did not meet certain conditions, including a restructuring in China. We have also stopped paying consulting fees.

As the proceedings continue and the SPAC market is booming this spring, Japanese tech giants have settled with Neumann and other early shareholders and agreed to buy about half of their previous shares. ..

The entrance to the WeWork office in Beijing last August.


Photo:

greg Baker / Agence France-Presse / Getty Images

But Neumann wanted more and sought more benefits from Softbank and WeWork, people familiar with the debate said.

As a result, cash was $ 106 million. This has other benefits in addition to the $ 92.5 million consulting fee he has already received. About $ 50 million of that will be paid to Mr Neumann’s lawyer, people familiar with the deal say.

Neumann’s $ 245 million stock award was initially a renegotiation of an early 2019 agreement aimed at encouraging the company to improve its reputation. This award, called interest, is similar to stock options and gives Neumann a profit above a certain minimum stock price. As of his late 2019 trading, the package provided him with a profit of over $ 19 per share.

As part of the February proceedings settlement, Neumann renegotiated the price per share to $ 0. This will effectively yield approximately $ 245 million worth of shares, based on BowX’s current share price of $ 12.30 on Wednesday. If the price falls below $ 10, Neumann is not eligible for a stock incentive.

Filing shows many other steps the company has taken to free itself from its eccentric co-founder.

As CEO, Neumann spent a large amount of acquisitions to extend WeWork’s services beyond office space. After he left, WeWork immediately set out to sell off most of those acquisitions.

Even considering the decline in WeWork’s stock price, the selling price could be a fraction of the initial cost.

WeWork sold 91% of its event planning website, Meetup.com, for $ 9.5 million in March 2020. This was down from $ 156 million in cash. Paid for the entire company In 2017, we sold the online marketing company Conductor for $ 3.5 million in late 2019. $ 113 million paid, Mainly in stock, 2018. Managed by office management company Q, WeWork Buy for $ 189 millionSold for $ 28 million, with about half the cash and half the stock.

Another controversial relic of Mr Neumann’s tenure is declining. The company has signed an agreement to cancel the lease on two of Neumann’s four WeWork leased buildings.

And WeWork revealed in July 2020 that it sold unspecified “non-core corporate equipment” for $ 45.9 million. According to someone familiar with the matter, the device was the Gulfstream G650ER, which wielded Neumann as he raised back and forth between surfing trips and meetings. Billions from investors. WeWork paid $ 63 million for jets in 2018.

Write to Elliott Brown eliot.brown@wsj.com And in Maureen Farrell maureen.farrell@wsj.com

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Former WeWork Chief Gargantuan Exit Package Gets New Sweetener

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