WeWork co-founder's $1.6b payout irks staff

A WeWork co-working space in Yokohama, Japan. Japanese conglomerate SoftBank Group will provide US$6.5 billion to WeWork, which is on the verge of running out of money.
A WeWork co-working space in Yokohama, Japan. Japanese conglomerate SoftBank Group will provide US$6.5 billion to WeWork, which is on the verge of running out of money.PHOTO: BLOOMBERG

Adam Neumann will step down as chairman in SoftBank bailout, with firm facing mass layoffs

SAN FRANCISCO • WeWork will narrowly avoid financial ruin and in the process, reward its former leader Adam Neumann with as much as US$1.2 billion (S$1.6 billion). The reaction from his former colleagues, who are still facing the prospect of mass job cuts and a corporate crisis: "You've got to be kidding me."

That was one of the comments posted on WeWork's staff-wide communications system on Tuesday, reflecting a broader mood throughout its headquarters in New York. Dozens of employees expressed indignation in interviews and messages to colleagues on company Slack channels that were relayed to Bloomberg. They requested anonymity in a bid to protect their jobs, as management weighs the dismissal of thousands of employees.

WeWork's board agreed on Tuesday to take a bailout from SoftBank Group, which will secure an 80 per cent stake. The Japanese conglomerate will provide US$6.5 billion to the business, which is on the verge of running out of money.

SoftBank will also buy as much as US$3 billion in stock from shareholders at the lowest price since 2015. Almost a third of that offer may be allocated to Mr Neumann, in addition to a consulting fee of about US$185 million, a US$500 million credit line and the ability to appoint two board members. In exchange, Mr Neumann will step down as chairman.

Most employees who sell their shares to SoftBank will do so for less than the paper value of their stakes when they were issued.

Mr Mike Adams, who sold a start-up to WeWork, described the payout to Mr Neumann as an "injustice".

Representatives for Mr Neumann and WeWork declined to comment.

In a statement announcing the deal, SoftBank founder Masayoshi Son said he is "committed" to WeWork and its employees.

WeWork co-chief executive officers Artie Minson and Sebastian Gunningham said the agreement with SoftBank will enable growth for the company and financial opportunities for employees and other shareholders.

Mr Neumann, 40, co-founded WeWork and built it into a global real estate company fuelled by relentless optimism and billions of dollars in investment capital and debt. His sermons about community and mission engendered fierce loyalty among staff and investors for years.

But his aura vanished over the last couple of months when public investors were given a closer look at the business ahead of an initial public offering (IPO).

WeWork's parent company, The We Company, abandoned the IPO, and SoftBank helped oust Mr Neumann as chief executive officer.

In recent weeks, an executive exodus and cost-saving measures have dampened morale. Especially in satellite offices, many workers have stopped coming in to work.

News of Mr Neumann's "platinum parachute", as one former employee described it, made things a lot worse this week.

A link to a news article about the deal on WeWork's Slack network on Tuesday drew more than 100 "thumbs down" emojis from employees.

Mr Neumann was the main subject of ire from staff, but some complaints were also pointed at the pair of men who replaced him as CEO last month: "Seriously, where's the e-mail from our co-CEOs or whoever's running the company now?"

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 24, 2019, with the headline 'WeWork co-founder's $1.6b payout irks staff'. Print Edition | Subscribe