WeWork founder Adam Neumann is getting US$1.7 billion from SoftBank just to leave the company
He also nearly ran the company into the ground.
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WeWork founder and former CEO Adam Neumann is getting a massive golden parachute from Japanese conglomerate SoftBank just to leave the company. SoftBank, which is WeWork's biggest investor, is paying Neumann US$1.7 billion to cut ties with the company and leave most of his stock behind.
On top of that, SoftBank will spend up to US$3 billion to buy out shares owned by employees and other early investors in the company, in addition to a further US$5 billion in debt financing for the embattled firm. Previously, SoftBank had also committed over US$10 billion to WeWork, whose business model revolves around leasing and refurbishing office space and then renting it out to individuals and startups.
SoftBank is also paying Neumann a US$185 million consulting fee and extending him a US$500 million line of credit, The Wall Street Journal reports.
Expert reactions were mostly incredulous. While they largely agreed that SoftBank is doing the right thing by removing Neumann from WeWork, they were also stunned by the sheer magnitude of Neumann's payout. In fact, many thought he should have gotten nothing at all. “It’s stone-cold crazy,” Eric Schiffer, CEO of the Patriarch Organization, told Business Insider. “I think SoftBank blinked, and Neumann walks away with one of the biggest hauls in modern history when he should have gotten very little.”
SoftBank gave WeWork a whopping US$47 billion valuation earlier this year, but its buyout now values it at just US$8 billion. Things began going downhill for the startup after it submitted paperwork to the government to become a publicly traded company. The IPO document went public in August, setting alarm bells ringing as it revealed heavy losses and the sheer amount of control Neumann and his wife exercised over the company. Neumann even trademarked the name "We" and licensed it to his own company, which borders on self-dealing.
The resulting backlash eventually led to Neumann stepping down as CEO, with Sebastian Gunningham and Artie Minson serving as co-CEOs moving forward.
WeWork also reportedly wanted to layoff as many as a few thousand employees, but it was so low on cash that it didn't have the funds to cover the severance payments necessary to do that. The company is closing or shuttering a number of businesses outside of its main co-working operations as well, including the WeGrow private school in New York City.
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