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SoftBank Nears Settlement With WeWork's Adam Neumann: Report

SoftBank Nears Settlement With WeWork's Adam Neumann: Report
  • Former WeWork co-founder and CEO Adam Neumann is working towards the legal tussle settlement with SoftBank Group Corp (OTC: SFTBF) (OTC: SFTBY). Neumann is reportedly close to agreeing at a roughly $500 million cut in his payout from less than 18 months of its IPO debacle, the Wall Street Journal reports.
  • SoftBank would buy the shares of early WeWork investors and employees, including nearly $500 million, to purchase shares from Neumann for around $1.5 billion, representing 10.5% of WeWork shares at $19.19 per share, as per CNBC report. It is half of what Neumann initially agreed.
  • Neumann is entitled to receive $480 million for 25% of his holdings. He would also retain 75% of his current holdings in the public company. 
  • SoftBank took a majority stake in WeWork after its failed IPO valued at $47 billion, compelling Neumann to step down over conflict of interest and unpredictable behavior. SoftBank agreed to buy $3 billion of shares from Neumann and others, including resolving its cash crisis. The agreement included a four-year, $185 million consulting fee for Neumann.
  • Last April, SoftBank defaulted a share buyback deadline over non-compliance with the payment, including a China subsidiary’s reorganization. All of this led to Neumann and other early WeWork investors filing separate lawsuits set to go to trial in early March. SoftBank discontinued Neumann’s consulting fee payments amid the fight. SoftBank had already invested $10 billion towards the company.
  • Therefore, the settlement would ensure its listing and attract cash injection. SoftBank withheld the $3 billion payment to Neumann and other shareholders following decreased demand for office space amidst the pandemic. The company’s valuation dipped to $2.9 billion from $47 billion as it had to cut down on jobs and withdrew from properties.
  • WeWork has succeeded in reducing its cash burn from $1.4 billion in the fourth quarter of 2019 to $517 million in the third quarter of 2020. The company’s flexible offering, enabling companies to rent monthly or yearly instead of 10-year leases, is expected to turn the company into profit by the fourth quarter of 2021.
  • Special purpose acquisition company (SPAC) BowX Acquisition Corp (NASDAQ: BOWX), which raised $420 million in an August IPO, is reportedly in talks with SoftBank regarding a WeWork deal valued at $10 billion.
  • Price action: BOWX shares are down 2.2% at $10.66 in the premarket session on the last check Tuesday.
  • Image Courtesy: Wikimedia

Related Articles (SFTBF + SFTBY)

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Posted-In: Wall Street Journal WeWorkNews Small Cap Legal Tech Media Best of Benzinga

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