WeWork Needed a Bailout—But Adam Neumann Still Leaves a Billionaire
(Bloomberg) -- WeWork’s value has tumbled, about 2,000 employees are being cut and many investors are nursing losses after the firm’s bailout.
But founder Adam Neumann is still a billionaire.
SoftBank Group Corp.’s proposed rescue package of WeWork involves Neumann selling about $1 billion of stock and getting a $185 million consulting fee from the Japanese firm even as the deal values the struggling office-sharing company at $8 billion, according to people familiar with the transaction. That’s down from an estimated $47 billion at the start of the year. Neumann will leave the company’s board though he still can assign two seats.
On these terms, Neumann’s net worth would be at least $1 billion, according to calculations by the Bloomberg Billionaires Index. While that’s a fraction of what it was on paper in January -- the last time SoftBank made an investment in WeWork -- it’s a remarkable return from a business that has never made a profit and seen its initial public offering spurned by skeptical investors.
A spokeswoman for Neumann declined to comment.
WeWork parent We Co.’s withdrawn prospectus sketched out ways Neumann has already monetized some of his stake. He sold hundreds of millions of dollars of stock in earlier funding rounds, according to the Wall Street Journal. He also has a $500 million credit line -- secured by WeWork shares -- from UBS Group AG, JPMorgan Chase & Co. and Credit Suisse Group AG. About $380 million was outstanding as of July 31. JPMorgan also loaned him $97.5 million.
That $500 million loan will now be repaid, a person familiar with the matter said. The SoftBank deal extends $500 million of credit to Neumann.
The bank loans helped Neumann, 40, collect assets worthy of a billionaire at a time when most of his net worth was on paper. Over the years he bought about $100 million of properties, including a Manhattan townhouse, a Westchester County farm and an 11-acre California estate. He also owns 10 commercial properties, four of which are leased to WeWork.
The company’s struggles had raised questions about whether Neumann would need to pledge additional shares to secure his borrowings and how he would repay the bank loans. The credit line was scheduled to mature next September, according to the prospectus.
WeWork had previously amassed more than $10 billion in commitments from SoftBank, the Japanese technology and communications conglomerate led by Masayoshi Son, and appeared to be headed for a rich public offering this summer. But public investors soured on WeWork, which lost $900 million in the first half of the year. As its estimated valuation plummeted, the company ousted Neumann as chief executive officer and ultimately pulled the IPO paperwork.
©2019 Bloomberg L.P.