WeWork takeover by SoftBank includes a big payout for former CEO: reports

WeWork co-founder Adam Neumann will reportedly get a significant payout under a deal in which SoftBank will take control of the troubled company.

Under the deal, the potential valuation of WeWork would drop to about $8 billion, a stunning fall from its peak of $47 billion, and an additional embarrassment for a company that was supposed to go public not long ago. Under that new expected valuation, SoftBank (SFTBF) would have put more money into WeWork to date than the company is worth.

Japanese conglomerate SoftBank is the largest investor of The We Company, WeWork’s parent company.

The terms of the reported deal, and how much Neumann can actually walk away with, are still coming to light. When first reported by the Wall Street Journal, the amount was pegged at up to $1.7 billion, including a $500 million loan to repay a credit line. Bloomberg similarly reported Neumann’s payout as part of the deal. The New York Times reported the plan indicates Neumann can sell up to $1 billion in stock but he must use those proceeds to pay back the $500 million loan. There is also a $185 million fee, which was similarly reported by other outlets, that will be paid to Neumann for consulting for SoftBank over four years, according to the Times said.

He is expected to step down from the board of directors as part of the SoftBank plan, as well, according to multiple outlets.

WeWork and SoftBank did not immediately respond to a request for comment.

Members work in a cafeteria and lounge area at the WeWork Cos Inc. 85 Broad Street offices in the Manhattan borough of New York, U.S., on Wednesday, May 22, 2019. WeWork has become the biggest private office tenant in London,?Manhattan?and Washington?on its way to?425 office locations in 36 countries overall.

Related article WeWork shuts 2,300 office phone booths over health scare

News of the deal caused a stir within WeWork’s ranks.As of early Tuesday afternoon, staffers are still waiting for an email or another form of acknowledgment of the reports from co-CEOs Artie Minson and Sebastian Gunningham, who took over the role from Neumann last month, according to one employee who spoke with CNN Business on the condition of anonymity.

Staffers sent dozens of messages discussing the reports in internal Slack chat room channels, the employee said. Some messages viewed by CNN Business highlight unease over how the deal and the reported payout may impact employees. One message suggested that in light of how much the company talked about the importance of community, Neumann should consider splitting his payout with staff. Another included the hashtag “#WEgotplayed.”

The We Company was said to be weighing at least two last-ditch financing options this week – the other being a possible loan package put together by JPMorgan Chase – to avoid running out of money after its disastrous attempt at an IPO.

The decision to move forward with SoftBank caps off a dramatic two-month period for The We Company. After filing paperwork for a highly anticipated IPO in August, the company faced a barrage of criticisms for how it operated: It had staggering losses, no women on its board and CEO Adam Neumann had unchecked power and numerous potential conflicts of interest.

Neumann ultimately stepped down as CEO amid reports that investors, including SoftBank, wanted to oust him. But he remained non-executive chairman.

While the We Company revised its paperwork to appease investors, it was too little, too late. The company was forced to postpone its IPO last month.

Since then, The We Company is said to be focused on belt-tightening. Several of the startups it acquired are reportedly for sale. It is reportedly gearing up for mass layoffs. The company also said it would cease operating its school, WeGrow, after this school year.

If that’s not enough, some of WeWork’s popular phone booths were pulled out of some rental offices due to “potentially elevated levels of formaldehyde.”