SoftBank is planning on paying Adam Neumann $200 million to step aside if it takes over WeWork
- SoftBank would pay WeWork cofounder Adam Neuman $200 million as part of its proposed deal to take over the struggling real-estate company, a source told Business Insider.
- As part of the deal, Neumann would give up his seat on WeWork's board and his voting shares, the source said.
- Neumann would also agree to support SoftBank's bid, Axios' Dan Primack reported.
- WeWork's board is expected to review competing bids from SoftBank and JPMorgan on Tuesday.
- Read all of Business Insider's WeWork coverage here.
WeWork cofounder and chairman Adam Neumann would see around a $200 million windfall as part of SoftBank's proposed deal to take over his troubled company, a source familiar with the negotiations told Business Insider.
As part of the agreement, Neumann would give up his seat on WeWork's board and his voting shares, the source said. Axios' Dan Primack previously reported the news, adding that one of the conditions of the agreement is that Neumann support SoftBank's bid for the commercial real-estate giant.
A WeWork representative declined to comment. SoftBank representatives did not immediately respond to a call seeking comment.
SoftBank was due to submit a proposal to WeWork's board on Monday. The coworking company's directors are expected to meet Tuesday to review it, as well as a competing proposal that's expected from JPMorgan.
Both proposals would value WeWork at $8 billion or less - a far cry from the $47 billion valuation it garnered from SoftBank in a funding round in January. But WeWork was left scrambling after its planned initial public offering fell through in the wake of massive resistance from potential investors. The company reportedly could run out of cash within a month without a new round of funding.
Read this: WeWork is set to evaluate rescue proposals from SoftBank and JPMorgan on Tuesday
Neumann's financial condition remains uncertain
As large as the $200 million payout is, it's almost certainly a small fraction of what Neumann likely would have seen had WeWork's IPO gone through, given his sizable stake in the company.
It's also unclear how the payout will affect Neumann's overall financial condition. According to WeWork's IPO paperwork, he had borrowed some $380 million from a collection of lenders, including JPMorgan, using his WeWork shares as collateral. Recent reports have suggested that the banks might be forced to issue a margin call to Neumann; essentially requiring him to put up more collateral due to the decline in the value of his shares.
SoftBank's deal to remove Neumann would complete his precipitous fall. When WeWork filed for its IPO, Neumann was CEO and held majority control of the company with 20 votes per share. He was later forced to step down as CEO and agreed to reduce his votes to just three per share.
Neumann was the focus of much of the pushback from potential investors, and reportedly from SoftBank also. He and his family members were involved in a series of transactions with the company that raised eyebrows, as did reports about him partying and using drugs.
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- Read more about WeWork:
- WeWork used massive discounts - in some cases, essentially giving away space for 2 years - to try to poach customers from rivals
- WeWork could face a cash crunch as soon as February. Industry watchers think SoftBank, its lenders, and the entire industry has too much at stake to let it go under.
- Even after ousting Adam Neumann as CEO, WeWork could still go public this year - if it prices its IPO low enough
- Firing Adam Neumann doesn't solve WeWork's biggest problem: The underlying business stinks