WeWork co-founder Adam Neumann settles settlement with SoftBank

SoftBank took a majority stake in WeWork after the attempt at the first public offering collapsed in 2019 when public investors refused to buy the shares of the money-losing company, and against Neumann’s conflicts of interest and volatile behavior. Mr. Neumann is stepping down as CEO following the IPO debacle.

The negotiations were sometimes rocky and there is no guarantee that it will yield an agreement, but if there is one, it could be concluded in the coming days, the people said.

Should there be a settlement, it could be followed by another agreement, as WeWork is also in talks to combine with a specialty procurement company, a move that will eventually turn it into a public company.

WeWork was in talks with a SPAC called BowX Acquisition Corp.

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and the two parties could reach an agreement in the coming weeks, the people said. There is no guarantee that WeWork will reach an agreement with BowX, and other financing and SPAC options are still on the table, people warn.

The Wall Street Journal previously reported that WeWork was in talks with BowX, which is taking place amid a spate of SPAC deals and a booming stock market. According to people familiar with the deal, WeWork could value about $ 10 billion.

The agreement with mr. Neumann would put an end to a fight that originated in the rescue operation of WeWork by SoftBank in October 2019, shortly after the IPO fell apart. The Japanese investment giant has agreed to buy $ 3 billion worth of shares from Mr. Neumann and others for sale as part of an agreement that also pumped money into the company when it was no longer cash for weeks. The agreement provided a $ 185 million four-year consultation fee for Mr. Neumann included, a huge golden parachute that was criticized at the time.

When SoftBank approached a deadline to complete the share purchase, the firm withdrew last April, saying certain conditions of payment had not been met, including the restructuring of a subsidiary in China. Mr. Neumann and other early WeWork investors each sued separately, and they began a legal skirmish that would be heard in early March. SoftBank has the payments on mr. Neumann’s consultation fee suspended amid legal battle.

WeWork was a black eye for SoftBank because most of the $ 10 billion he invested has at least disappeared on paper. In addition to cutting his account to save WeWork, resolving the dispute could help pave the way for a listing that could inject new cash into the company. For mr. Neumann and the other investors will be able to avoid the risk of getting nothing if SoftBank wins during the trial.

SoftBank’s decision to withhold payment of $ 3 billion comes as the coronavirus pandemic reduces the need for office space and puts a big dent in WeWork’s business. The company’s value has shrunk to $ 2.9 billion, SoftBank told investors in an earnings presentation in May, of $ 47 billion at its peak. WeWork, which leases office space on long-term leases and then leases on shorter terms after the renovation, has cut thousands of jobs and moved out of dozens of buildings around the world.

The company is still overloaded with red ink, although it is much less than before.

Under current CEO Sandeep Mathrani, who joined in early 2020, WeWork reduced its $ 1.4 billion cash burn in the fourth quarter of 2019 to $ 517 million in the third quarter of 2020.

Managers are now betting that WeWork’s flexible offering, which enables companies to rent monthly or annually instead of, among other things, signing ten-year leases, will be a hit among those looking to reconsider their office space after the pandemic. . Mr. Mathrani recently said he believes the company will make a profit in the fourth quarter of 2021.

Write to Maureen Farrell at [email protected] and Eliot Brown at [email protected]