SoftBank has spelt out the full cost of its bitter divorce from WeWork co-founder Adam Neumann, detailing a settlement worth hundreds of millions of dollars.
Neumann has received cash, stock awards and fees worth close to $450m in a settlement which has been the subject of fraught negotiations since he was forced to step down from the co-working company as chief executive in 2019, after a failed attempt at an initial public offering.
With WeWork targeting a second run at an IPO, this time via a merger with a blank-cheque company, the agreement is an attempt to break with the past. SoftBank regards the hefty cost as a reasonable price to pay to “put the Neumann era behind them”, said a person familiar with the negotiations.
SoftBank had struck a $1.6bn exit package with Neumann in 2019, but in April 2020 pulled out of a tender offer for WeWork stock which would have yielded almost $1bn of that sum. Neumann and two independent directors sued SoftBank in response, but the two sides settled the dispute this February.
The final settlement, 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 of more than $105m, almost half of which is expected to cover Neumann’s legal fees.
The documents, filed to the Securities and Exchange Commission ahead of the company’s merger with special purpose acquisition company BowX Acquisition, also detail a deal which could make Neumann’s so-called “profits interests” worth close to $250m.
SoftBank cut the strike price on Neumann’s profits interest units, which are similar to stock options, allowing him to reap gains if WeWork successfully lists and BowX shares trade above $10.
The settlement also confirms SoftBank paid Neumann $92.5m under a 2019 consulting agreement. We Holdings, an investment vehicle Neumann controlled, also sold $578m worth of WeWork shares to SoftBank.
The Japanese group, led by billionaire chief executive Masayoshi Son, did more than any other investor to propel the extraordinary growth of WeWork. Fuelled by its more than $10bn of investment, WeWork’s valuation jumped to $47bn in the run-up to its listing attempt two years ago, making it one of the most highly valued start-ups in the world.
But the relationship between SoftBank and Neumann soured on WeWork’s financial performance and the eccentricities of the co-founder’s management style.
The company’s valuation tumbled, hitting $8bn in the months after the first IPO attempt was pulled, before SoftBank offered a rescue package. WeWork continues to incur 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 spokesman for Neumann declined to comment.