SoftBank explained the full cost of its bitter divorce from WeWork co-founder Adam Neumann, which details a deal worth hundreds of millions of dollars.
Neumann received money, stock awards and taxes worth close to $ 450 million in an agreement that has been the subject of distressed negotiations since he was forced to leave the partnership as chief executive in 2019, after to a failed attempt at an initial public offering.
With WeWork aiming for a second run in an IPO, this time due to a merger with a white-collar company, the deal is an attempt to break with the past. SoftBank considers the significant cost as a reasonable price to pay for “putting the Neumann era behind,” said one person familiar with the negotiations.
SoftBank had made a $ 1.6 billion exit package with Neumann in 2019, but in April 2020 it came out with a bid for WeWork shares that would have yielded nearly $ 1 billion of that amount. Neumann and two independent directors have been sued in SoftBank in response, but both parties have resolved the February dispute.
The final agreement, details of which emerged in regulatory filings earlier this month and were first reported by the Wall Street Journal, includes a cash payment from SoftBank and its affiliates over $ 105 million, nearly half of which is expected to cover Neumann’s legal rights.
The documents, presented to the Securities and Exchange Commission prior to the company’s merger with special-purpose acquisition company BowX Acquisition, also detail an agreement that could make Neumann’s so-called “profit interests” worth close to $ 250m. .
SoftBank has cut the price of strangeness on Neumann’s profit interest units, which are similar to stock options, allowing it to make gains if WeWork lists successfully and BowX shares trade above $ 10. .
The establishment also confirms that SoftBank paid Neumann $ 92.5 million in a 2019 consultation agreement. We Holdings, a Neumann-controlled investment vehicle, also sold $ 578 million worth of WeWork shares to SoftBank.
The Japanese group, led by billionaire executive director Masayoshi Son, has done more than any other investor to drive WeWork’s extraordinary growth. Fueled by investments of more than $ 10 billion, WeWork’s valuation jumped to $ 47 billion in preparation for its listing attempt two years ago, making it one of the most popular start-ups in the world. .
But the relationship between SoftBank and Neumann has focused on WeWork’s financial performance and the eccentricity of the co-founder’s management style.
The company’s valuation fell, hitting $ 8 billion in the months following the first IPO attempt, before SoftBank offered a safety package. WeWork continues to encourage heavy losses: the Financial Times revealed last week that the company lost $ 2.1bn in the first three months of this year.
SoftBank, WeWork, and a Neumann spokesman declined to comment.