WeWork chairman Adam Neumann can pay around $ 200 million to forfeit control of the company he founded if it is purchased by SoftBank, a new report claims.
A source familiar with the negotiations told Business insider that Neumann would see the huge payout if he agreed to give up his place on the WeWork board, along with his voting shares.
On Monday, SoftBank Group offered nearly $ 10 million to WeWork and its shareholders under a takeover plan that would sustain the start of office sharing in the US and lead to Neumann's exit.
The offer was far from the $ 47 billion valuation WeWork received from SoftBank in January during a financing round.
WeWork could be without money next month without new financing, sources said, after the company had plans for a stock market introduction in September.
It left the stock market flotation when investors doubted the big losses, the sustainability of its business model and the way WeWork was led by co-founder Neumann, who gave up his CEO title last month and now acts as chairman of the board.
WeWork chairman Adam Neumann (shown in May 2017) could be paid roughly $ 200 million to forfeit control of the company he founded, should it be purchased by SoftBank, insiders say
On Monday, SoftBank Group offered nearly $ 10 million to WeWork and its shareholders under a takeover plan that would sustain the start-up of office sharing in the US and lead to Neumann's exit (file photo)
Neumann's resignation from the management of WeWork's parent company, The We Company, would mean a dramatic fall in grace, given Wall Street's expectations earlier this year that he would lead one of the most anticipated stock market debut in America.
Although Neumann's investors had been willing to entertain his eccentricities since co-founding WeWork in 2010, his free-spirited ways and festive lifestyle came to the fore when he failed to get the company on the stock market.
While attempting to chase IPO investors last month, Neumann was criticized by corporate governance experts for arrangements that went beyond the usual practice of having majority voting through special share classes.
These include giving a vote to his legacy in his replacement as CEO and binding the voting rights of shares to how much he donates to charities.
Neumann had also entered into various transactions with We Company, making the company a tenant in some of its properties and charging rent. He has also secured a $ 500 million credit line from banks that use company shares as collateral.
Neumann's resignation from the management of WeWork's parent company, The We Company, would mean a dramatic fall in grace, given Wall Street's expectations earlier this year that he would lead one of the most anticipated stock market debut in America. Neumann is pictured at the Time 100 Gala 2018
The We Company board will meet on Tuesday to evaluate SoftBank's offer against an alternative financing proposal from JPMorgan Chase & Co, sources said.
JPMorgan faces challenges in putting together a debt package for WeWork because it has not endorsed it and is trying to find banks and institutional investors to support it, the insiders said.
SoftBank has offered WeWork $ 5 billion in new money in the form of debt, the sources said. It also proposes to accelerate a previous $ 1.5 billion equity commitment to WeWork in the form of warrants that expire in April, the sources said.
This commitment was made in January with a valuation of $ 47 billion, but SoftBank is now trying to renegotiate with a valuation of around $ 8 billion, the sources said.
SoftBank also proposes to bid for up to $ 3 billion to acquire WeWork shares from existing investors and insiders, including Neumann, the sources said.
Based on the outcome of the bid, SoftBank could own between 60% and 80% of WeWork, but will try to prevent the company from being consolidated in its books, one of the added sources.
SoftBank and its $ 100 billion Vision Fund already own about a third of WeWork through previous investments totaling $ 10.6 billion.
Neumann could step out of the We We Company board as part of the deal with SoftBank and become an adviser, according to the sources.
SoftBank Chief Operating Officer Marcelo Claure would succeed Neumann as chairman, the sources said.
The nearly $ 10 million offering from Softbank was far removed from the $ 47 billion valuation that WeWork received from the former company in a January financing round (photo of the file)
WeWork, SoftBank and JPMorgan declined to comment when they were approached by Reuters on Monday. A spokeswoman for Neumann also declined to comment.
SoftBank has prepared Mizuho Financial Group Inc. as part of the syndication of the $ 5 billion debt package, one of the sources said.
The package includes letters of credit for more than $ 1 billion, as well as senior secured and subordinated bonds, the source added.
Mizuho declined to comment.
The seven-member board of the company has appointed two directors to represent the interests of all investors in the company by sitting on the special committee on financing plans.
One is Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital. The other is Lew Frankfort, the former CEO of Coach of luxury handbags.
Artie Minson, formerly WeWork & # 39; s chief financial officer, and Sebastian Gunningham, who was vice-president of the company, now serve as co-chief executives.
WeWork tries to slow down the expansion and to reduce the number of new lease contracts.
The We Company board has also reached agreement on a cost reduction plan that includes layoffs. The cuts will take place in the coming weeks, according to the sources.
. (TagsToTranslate) Dailymail (t) news