WeWork’s ousted founder Adam Neumann will land a $1.7bn (£1.3bn) pay day as part of a rescue deal from investor SoftBank – while thousands of the company’s ordinary staff face an uncertain future.
The business decided on Tuesday to accept funding from SoftBank in a move that cut its valuation to just $8bn and removed Mr Neumann as chairman. The firm had previously hoped to float for as much as $47bn.
As part of the deal, he relinquished his voting shares in the firm along with his board seat.
Mr Neumann will be given a $185m consulting fee and will also sell $1bn of stock to SoftBank, and will also get $500m in credit so he can pay off existing loans, The Wall Street Journal reported.
So, he gets to pay off the loans he’d taken out back by the value of that now collapsed stock. Phew for him, eh?
Because if he didn’t there would be bankers calling to ask for their money back. This also explains this:
A rival debt package offered by JPMorgan was rejected by WeWork’s board. JPMorgan’s proposal was seen as more risky because it had not underwritten the debt and was seeking banks and other investors to back the deal.
Getting the refinancing deal requires Neumann’s consent as the major (or a?) shareholder. A deal that didn’t get him off the hook for those loans isn’t going to be attractive now, is it?
Of course, this is merely suspicion but my bet is that JPM’s offer didn’t buy him out and therefore was rejected.
I was listening to a program on this and they made an interesting point that WeWork’s failed IPO changes everything in tech investment.
In the past bankers leading an IPO would trot round investors and make the point that “everyone’s investing” and leading investors were obliged to take stock for fear of missing out. Now they can just point at WeWork and say, no they aren’t and walk away.
Reading the above it strikes me that this falls in to the classic argument that if you owe the bank $400k and can’t pay, you’re in trouble, if you owe the bank $400m and can’t pay they’re in trouble.
Neumann is a total fucking genius. He started a ponzi scheme office rental company, persuaded a bunch of idiots it was a tech company, took hundreds of millions out of it , now gets a billion dollar golden handshake and he’s still not in prison. Man’s a dude. And he’s got a bridge to sell you.
“ Mr Neumann will be given a $185m consulting fee and will also sell $1bn of stock to SoftBank, and will also get $500m in credit so he can pay off existing loans,”
So Neumann gets to keep $685 million?
Oy vey!
Quick question, how solid is SoftBank? Once the property owners start with the rent demands, what will happen?
@Patrick +1
@Diogenes – Softbank won’t be on the hook for WeWork’s leases. The worst that can happen is it burns the $17bn already squandered on WeWork.
WeWork’s failed IPO changes everything in tech investment.
Really? Mind you, I would have thought ‘first make sure your tech investment is really a tech firm’ would have already been part of investor considerations, so what do I know?
Will Elcon Busk hire Mr Neumann?
MC…Softbank seems to be going through a run of bad luck…
“The financial difficulties of WeWork and the 30% slide in Uber since the ride-hailing company floated in May have begun to rebound on Softbank. Its $100 billion Vision Fund has poured $7.6 billion into Uber and investors are reportedly reluctant to back a successor fund Softbank’s founder Masayoshi Son wants to launch.”
https://citywire.co.uk/investment-trust-insider/news/baillie-gifford-japan-s-wework-cut-out-in-softbank-storm/a1278796?