New SoftBank Deal Lets WeWork Cofounder Adam Neumann Walk Away A Billionaire

Despite an ill-fated IPO attempt and a precipitous fall as the head of one of Silicon Valley’s formerly most valuable startups, Adam Neumann will walk away from WeWork as a billionaire. Weeks after WeWork pulled its plans to go public and Neumann resigned as CEO, SoftBank Group is taking over the coworking giant and allowing Neumann, a cofounder, to cash out of most of his shares. The Japanese conglomerate, headed by billionaire Masayoshi Son, will pay Neumann up to $1 billion for the bulk of his WeWork stock as well as $185 million in consulting fees, and extend a $500 million credit line for him to pay back existing loans. Forbes estimates that Neumann will be a billionaire as a result of the deal.  

SoftBank, which already owns a third of WeWork, will spend up to $3 billion buying shares from existing investors and shareholders, while putting up $1.5 billion in fresh capital and extending $5 billion in loans to the company, according to a source familiar with the matter. Neumann, who owned an estimated 18% of the firm at the time of the planned IPO, has the option of selling up to $970 million of his stock to SoftBank, though he has not yet decided whether he’ll do so, says the source. Neumann will also be paid $185 million over the next 12 months to be an exclusive consultant to WeWork for the next four years. The $500 million credit line, of which $395 million is drawn down, will transfer debt he currently owes to JPMorgan over to SoftBank. After taking into account taxes on his previous sales and his debt to SoftBank, Forbes estimates that Neumann is now worth $1 billion. His net worth may fall below $1 billion again if he sells his shares due to tax obligations. 

The deal does come at a price. Neumann will step down as the chairman of the board, while SoftBank executive Marcelo Claure is expected to replace him; Claure may also bring on a new CEO to replace current co-CEOs Sebastian Gunningham and Artie Minson. Neumann will remain a board observer and is giving up his right to appoint two board seats, says the source familiar with the deal. 

An Israeli native, Neumann cofounded WeWork with Miguel McKelvey in 2010. The company—which leases commercial real estate and converts it into modern co-working spaces with micro-roasted coffee, game rooms and wellness events like kickboxing sessions—quickly rose as a tech darling, fetching a $47 billion valuation in its January 2019 funding round. It also tried to branch out, launching WeLive—apartment buildings with smaller personal units and large communal spaces—in 2016, though so far it only has two such buildings, one each in New York City and Washington, D.C.

The unicorn ran into trouble as it looked to join a slew of tech companies going public after years of private fundraising. WeWork’s August IPO filings revealed that the firm lost $905 million in the first six months of 2019 on $1.54 billion of revenue—after losing $1.9 billion in 2018 on $1.8 billion revenue. Some of Neumann’s actions, including selling an estimated nearly $700 million of his WeWork shares and owning properties that were leased back to WeWork, also came under scrutiny. By late September, WeWork’s valuation was in free fall. Neumann stepped down as CEO, and the IPO was scrapped. Forbes, which estimated Neumann’s wealth at $4.1 billion after its January fundraising round, pulled the eccentric entrepreneur from its billionaire ranks in early October. 

Editor’s note: Adam Neumann’s net worth has been updated to $1 billion from $1.1 billion, based on new information from WeWork. The company has officially announced the terms of the deal, which includes SoftBank buying up to $3 billion of existing stock at $19.19 per share, and investing in an additional $1.5 billion at $11.60 per share.

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