A fall from grace and a far cry from the days of hype and hubris, Softbank has finally moved in to resolve the pending lawsuit with Adam Neumann – one of the most controversial startup entrepreneurs in recent times.
After a much-publicized fallout which amplified after the failed IPO fiasco, the Japanese conglomerate has reportedly entered into a settlement agreement with the Israeli entrepreneur. While all the terms overseeing the pact have not yet been made public, the shake of the hands means an end to the fight over a collapsed stock transaction.
According to people in the know, Neumann will walk out the company’s doors with roughly $480 million, giving up for a year his role on the board of the co-working company he himself helped create.
In addition to the mammoth sum, Softbank will also be paying Neumann $50 million to cover legal fees and an additional $50 million as part of a non-compete fee he was previously promised, which will also give him a 5-year extension on the loans owed to the Japanese investor.
While the eccentric Israeli was previously slated to receive close to $1 billion following his departure, the agreed-upon sum will now see the embattled real estate start-up solidify control with its largest investor. It also ends the need for a March 4 trial that was supposed to take place in Delaware, home to more than 60% of Fortune 500 companies, and headed by Delaware Chancery Court Judge Travis Laster.
Following the legal settlement, SoftBank will acquire 10.5% of the company’s shares for $1.5 billion, which will also leave Neumann as the largest private shareholder in the company which he founded. Post the agreement, Neumann could claw back into the billionaire category, a status which he relinquished in 2019 when the WeWork fiasco surfaced. At the time, his wealth was put forth somewhere around $450 million, compared to a record $14 billion against his name in WeWorks’s halcyon days. He has taken to dabbling in Valon Mortgages, which has been in Neumann’s eyes since last year.
This deal brings closure to a saga that saw Neumann lead WeWork to a bombed attempt at an IPO in 2019, during which the shared workspaces company was valued at $9 billion. After the spectacular underperformance in the IPO by WeWorks, Neumann got the axe, followed by Softbank’s bailout offer to buy $3 billion in stock from WeWork investors, including close to $1 billion from Neumann himself.
Alas, with anger simmering in the company employees who were livid as thousands of them got culled during some difficult times, Softbank CEO Masayoshi Son backtracked at the beginning of last year. With Neumann alleging wrong on Softbank’s part to honour the agreement even the pandemic gathered momentum, he responded with a lawsuit.
While Softbank had countered with counters that it pulled out due to WeWork’s inability to meet the deal’s closing terms, this present settlement allows WeWork to finally move beyond the chapter of its infamous Israeli CEO.
Rumours abound that the shared workspaces giant is mulling at a potential merger with a blank-check company. The motivation behind doing right by the settlement could well point to a renewed hope of taking WeWork public again, at a $10 billion valuation this time around.
WeWork, now headed by two assigned executives, has sought to introduce significant cutbacks, laying off around 2,000 employees. According to a report, WeWork recorded income of $811 million in the third quarter of 2020, burning through another $517 million in the offing. Softbank’s funding means that the company has added a further $3billion in its cash box.
SoftBank, who has already taken some heavy hits on its shared-workspace roller-coaster, would want to make the most of the current momentum to get WeWork listed.
As they know all too well now, the opportunity could slip at any moment.
Stay tuned for more updates.