November 28, 2021

Former WeWork Chief’s Gargantuan Exit Package Gets New Sweetener

Nearly two years ago,

SoftBank Group Corp.

9984 -2.20%

sought to part ways with WeWork co-founder

Adam Neumann

when it bailed out the shared-office company. It hasn’t been an easy divorce.

Securities filings from earlier this month show WeWork in February gave Mr. Neumann an enhanced stock award worth roughly $245 million, a benefit that wasn’t extended to other early shareholders and hasn’t been previously reported.

The deal was part of a renegotiation of the former chief executive’s giant 2019 exit package meant to end a long-running dispute between him and SoftBank and help clear the way for a public listing for WeWork, according to people familiar with the matter.

In addition, the final package gave him nearly $200 million in cash, let him refinance $432 million in debt on favorable terms and allowed an entity Mr. Neumann controls to sell $578 million in WeWork stock.

The stock sale was open to all investors while the other benefits were reserved for Mr. Neumann.

The filings also show how, after Mr. Neumann’s exit in the fall of 2019, WeWork took big losses as it sold off a number of companies acquired at his direction. It garnered just $164 million on 10 investments that were initially purchased for $759 million in cash and WeWork stock.

The disclosures were made as WeWork completes a merger with

BowX Acquisition Corp.

BOWX 0.74%

, a special-purpose acquisition company. The deal would allow the shared-office company to complete a public listing. A failed attempt at an initial public offering in 2019 led to Mr. Neumann’s exit.

Executive-severance experts said the package stands out not only for its enormous size, but also given Mr. Neumann’s record. The valuation of WeWork, which he co-founded in 2010, fell to around $8 billion when he left from $47 billion in early 2019. In all, WeWork has raised more than $11 billion to build a company worth $7.9 billion, not including debt.

“Generous would be an understatement,” said

Conor Callahan,

a management professor at the University of Illinois at Chicago who studies severance packages. “It’s going to be something people are going to be very upset about.”

Indeed, the move will likely further sting some former employees. More than 90% of WeWork’s staff held stock options that were underwater when SoftBank bailed out the company in 2019. While WeWork repriced stock options at a far lower price for staff that stuck around, thousands were laid off as the company downsized, forgoing all their options.

Helping explain how Mr. Neumann managed to negotiate such rich terms is that, unlike most executives at major corporations, he controlled the company by holding stock with 10 times the votes of a normal share. In effect, SoftBank was paying him to give up that control, Mr. Callahan said.

Mr. Neumann’s exit negotiations date to fall 2019, when the company botched the attempted IPO. WeWork, which had been the country’s most valuable startup earlier that year, came under fire from investors concerned with its prodigious losses, Mr. Neumann’s potential conflicts of interest and his erratic management style. As the IPO faltered, he resigned as CEO, but effectively remained in control of the company, given his high-vote stock and his position as chairman.

Weeks later, SoftBank readied a rescue plan for WeWork, which was low on cash, but it wouldn’t invest until Mr. Neumann gave up control and his board seat, SoftBank executives have said. After a negotiation, SoftBank agreed to give Mr. Neumann a $185 million consulting fee, to allow an entity he controls to sell $972 million of stock and to refinance $500 million in debt tied to his remaining shares.

Months later, SoftBank reneged on the stock-purchase deal, saying certain conditions—including a corporate restructuring in China—hadn’t been met. It also stopped paying the consulting fee.

Lawsuits followed and as a trial approached this spring while the SPAC market boomed, the Japanese technology giant settled with Mr. Neumann and other early shareholders, agreeing to buy around half as much stock from them as it had before.

The entrance to a WeWork office in Beijing last August.


greg baker/Agence France-Presse/Getty Images

But Mr. Neumann wanted more and pushed SoftBank and WeWork for additional benefits, people familiar with the discussion said.

The result was $106 million in cash, which comes on top of the $92.5 million in consulting fees he already received, among other benefits. About $50 million of that is due to go to Mr. Neumann’s attorneys, people familiar with the deal have said.

Mr. Neumann’s $245 million stock award was a renegotiated version of an early 2019 agreement initially meant to encourage him to boost the company’s valuation. The award, called a profits interest, is similar to a stock option and gives Mr. Neumann gains above a certain minimum share price. As of his late 2019 deal, the package gave him any gains above $19 a share.

As part of the February litigation settlement, Mr. Neumann renegotiated it to a lower per-share price: $0. That effectively gives him around $245 million worth of stock based on BowX’s current share price, which stood at $12.30 on Wednesday. If the price falls below $10, Mr. Neumann is ineligible to receive the stock award.

The filings show a number of other steps the company has taken to untangle itself from its eccentric co-founder.

As CEO, Mr. Neumann spent heavily buying companies in a bid to expand WeWork’s offerings beyond office space. After he left, WeWork quickly set out to sell off most of those acquisitions.

The sales prices were sometimes a fraction of the initial cost, even when accounting for declines in the value of WeWork’s stock.

WeWork sold 91% of event-planning website for $9.5 million in March 2020, down from the $156 million in cash it paid for the whole company in 2017. It sold online-marketing company Conductor for $3.5 million in late 2019, down from the $113 million it paid, mostly in stock, in 2018. Office-management company Managed by Q, which WeWork bought for $189 million, in roughly half cash, half stock, was sold for $28 million.

Another controversial relic of Mr. Neumann’s tenure is diminished. The company struck a deal to cancel leases in two of four WeWork-leased buildings that are owned in part by Mr. Neumann.

And WeWork disclosed it sold unspecified “noncore corporate equipment” for $45.9 million in July 2020. The equipment, according to a person familiar with the matter, was the Gulfstream G650ER that whisked Mr. Neumann around as he shuttled between surfing trips and meetings to raise billions from investors. WeWork paid $63 million for the jet in 2018.

Write to Eliot Brown at and Maureen Farrell at

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Related Posts

Venmo to Charge Users for Selling Goods and Services

June 26, 2021

June 26, 2021

Venmo, the payments app owned by PayPal Holdings Inc., PYPL -1.23% will soon allow users to sell products and services...

New York Attorney General Probe of Trump Organization Now a Criminal Investigation

May 19, 2021

May 19, 2021

New York state Attorney General Letitia James at a news conference in August last year. Photo: Kathy Willens/Associated Press Updated...

Federal Judge Stops Biden Administration From Blocking New Oil and Gas Leases

June 15, 2021

June 15, 2021

A federal judge in Louisiana issued a preliminary injunction blocking the Biden administration from pausing new oil and gas leases...

Google, Facebook Pressure Falls Short as Major Antitrust Measures Advance in House Committee

June 24, 2021

June 24, 2021

WASHINGTON—A House committee approved far-reaching legislation to curb the market dominance of tech giants, including Alphabet Inc.’s Google and Facebook...

Amazon Demands One More Thing From Some Vendors: a Piece of Their Company

June 29, 2021

June 29, 2021

Suppliers that want to land Inc. as a client for their goods and services can find that its business...

Covid-19 Aid to Concert Halls, Theaters Set to Be Distributed Next Week

May 21, 2021

May 21, 2021

WASHINGTON—The Small Business Administration is aiming to start awarding Covid-19 aid to concert halls, theaters and other live-entertainment venues early...

UPS Explores Same-Day Delivery Option

June 9, 2021

June 9, 2021

United Parcel Service Inc. UPS -4.15% is exploring a same-day option, a delivery model that has been employed by gig-economy...

Elon Musk’s Starlink Could Get Boost From German Subsidies

June 1, 2021

June 1, 2021

BERLIN—Germany could become the first large nation to subsidize the use of consumer satellite internet services such as that offered...

Despite Pressure, Biogen’s Alzheimer’s Drug Still a Likely Blockbuster

June 29, 2021

June 29, 2021

American taxpayers are set to foot most of the bill for Biogen ’s new treatment for Alzheimer’s disease, and investors...

How to Shop Online and Not Get Ripped Off

June 20, 2021

June 20, 2021

Shopping online can feel like magic. A couple of clicks and a few days later, a box is on your...

The Hedge Fund Manager Who Did Battle With Exxon—and Won

June 12, 2021

June 12, 2021

Christopher James’s decision to do battle with one of the world’s biggest oil companies began with a family dinner in...

Japan’s In-Home Robot Experiment Short Circuits

June 29, 2021

June 29, 2021

TOKYO—Japan’s humanoid robots are struggling to find homes. SoftBank Group Corp.’s robotics unit said Tuesday it stopped manufacturing a humanlike...

Short-Staffed Restaurants Prop Up Table Service With Technology

June 30, 2021

June 30, 2021

Casual-dining chains are leaning on technology to make the sit-down restaurant experience more automated for guests and more streamlined for...

Google to Pursue Pentagon Cloud-Computing Contract

November 3, 2021

November 3, 2021

Google is pursuing a massive cloud-computing contract with the Department of Defense, nearly three years after abandoning a similar bid...

Breaking Up Japan Inc.’s Love Affair With Itself

June 21, 2021

June 21, 2021

Japan’s corporate-governance reform has been a long, often painful process. But there has been some recent progress on one perennial...