WeWork founder Adam Neumann received $445m payout in exit package
Neumann received $245m in company stock and $200m in cash earlier this year as part of a renegotiation with investor SoftBank
Last modified on Thu 27 May 2021 12.51 EDT
WeWork founder Adam Neumann received $245m in company stock and $200m in cash earlier this year, part of an enormous exit package from the office rental company he led to dizzy heights before its equally dramatic fall.
The award comes nearly two years after a disastrous attempt by the company to go public and the ousting of Neumann.
The post-divorce payout, the Wall Street Journal reported on Thursday, is part of a renegotiation of Neumann’s 2019 exit package with primary investor SoftBank, and designed to clear the way for a new effort to list WeWork as part of a special-purpose acquisition company.
In addition to the $245m grant, Neumann received $200m in cash, was able to refinance $432m in debt on favorable terms, and allowed a finance company controlled by the former chief executive to sell $578m in WeWork stock.
Neumann’s ability to negotiate such rich terms was helped by the fact that his shareholdings controlled 10 times the votes of a normal shareholder, and he was able to argue for a higher price to cede control.
Filings with US regulators also showed the scale of losses incurred from the sale of companies acquired when Neumann was attempting to expand WeWork beyond its original office rental business. Ten companies costing $759m were sold off for just $164m. A $63m company jet, a Gulfstream G650ER, was also sold off.
WeWork was valued at $47bn in early 2019 but subsequently fell to around $8bn, excluding debt, and the scale of Neumann’s severance from the company has shocked corporate governance experts.
“The captain rammed the ship into a bridge and then was given the value of the ship to leave,” says Charles Elson, an expert in corporate governance at the University of Delaware. “The question is, should you reward someone who showed problematic conduct? Evidently that is what happened here.”
The settlement, predicts Elson, is likely to rankle other WeWork shareholders and former employees not afforded similar terms. According to the Journal, more than 90% of WeWork’s staff held stock options that are worth less than when SoftBank bailed out the company in 2019. Thousands of staff have also been laid-off, forgoing all their options.
Initially, Neumann gave up his seat on the board for a $185m consulting fee, clearance to sell $972m of stock and to refinance $500m in debt. The current compensation is a renegotiation of that agreement that includes the cancellation of WeWork lease agreements with two of four buildings that are owned in part by Neumann.
After the collapse of WeWork’s initial public offering effort, Neumann and his wife, Rebekah Paltrow Neumann, spent time in Israel but have since returned to the US. Last year, he acquired the rights to the curriculum developed for WeGrow, a private school launched as an educational arm of the We brand.
WeWork, meanwhile, reports that occupancy of its work-share spaces has grown to 50% after collapsing from 72% during the pandemic. BowX Acquisition Corp, a special-purpose acquisition company that is merging with WeWork, places its value at $9bn including debt. SoftBank, which poured more than $11bn into the company, has told investors that it values WeWork at $2.9bn, according to the Journal.
Neumann’s latest settlement suggests that investors have learned little, says Elson. “It’s the problem of this era. No one is held accountable,” he said. “Neumann lost money for people that invested with him and left vastly enriched, and that doesn’t make a lot of sense.”
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