- Current and former WeWork employees said they were upset with the payouts that former CEO Adam Neumann will receive in SoftBank’s rescue deal. Neumann will resign from WeWork’s board but still earn a consulting fee.
- One New York employee said “people are pissed,” particularly about the valuation SoftBank is giving WeWork in a tender offer to buy insider shares, “which is an FU to most employees.”
- Employees told us they hadn’t received any communications from the top about the SoftBank rescue and were anxious to learn more about the status of job cuts.
- For more WeWork stories, click here.
WeWork employees learned SoftBank would be taking over the coworking company from a Wall Street Journal report on Tuesday morning.
By late morning, insiders told us that they had yet to receive any communications about the deal from WeWork leadership. Nine current and former employees told Business Insider they were frustrated with SoftBank’s approach — particularly with how former WeWork CEO Adam Neumann will fare in the deal. Because employees have signed strict nondisclosure agreements, Business Insider is not publishing their names.
According to The Journal report, Neumann could get nearly $1 billion from selling his own shares as part of a SoftBank tender offer available to workers and other investors that gives WeWork an overall $8 billion valuation, a far cry from the $47 billion valuation given by a January investment by SoftBank.
Had WeWork pulled off an initial public offering, early investors holding shares would have been subject to a lockup period before selling them on the public markets. Share sales by a sitting CEO would also have been publicly disclosed and heavily scrutinized — though Neumann was forced to resign days before the company officially postponed the IPO.
Neumann will also keep a stake in WeWork, though he will resign as nonexecutive chairman of the company’s board, according to The Journal. The report also said he would stay on as a board observer and get a personal $500 million credit line from SoftBank in place of one he has with JPMorgan, UBS, and Credit Suisse. Neumann will also get a $185 million consulting fee from SoftBank.
Employees contrasted Neumann’s consulting fee with their own anxiety about what will happen to their jobs and equity options. According to the Wall Street Journal report, the various aspects of the SoftBank deal essentially hands Neumann $1.7 billion.
“Everyone is trying to understand the $1.7 billion payout to Neumann. People are pissed,” said one current New York employee, who called SoftBank’s $3 billion stock buyback “an FU to most employees.”
SoftBank had purchased $1 billion in insider shares in January at a $20 billion valuation.
WeWork’s board opted for the SoftBank rescue over a financing package from JPMorgan. Intense public scrutiny of the coworking company’s wide losses, Neumann’s leadership, and his various financial involvements with WeWork had contributed to the derailing the company’s IPO.
To be sure, the SoftBank deal could also help WeWork stave off an even grimmer fate. The coworking giant was in danger of running out of cash in the coming weeks, according to media reports, after failing to raise money in the IPO and related debt deal.
One source with knowledge of the deal said, “Adam brokered and backed the tender offer so employees could sell into it. They will be taken care of.” That source declined to offer further details.
That’s not reassuring former staff.
“WeWork might be financially bankrupt; Adam is morally bankrupt. There’s no excuse for it,” one former employee said while speaking about Neumann’s exit package. “I want to see him put your money where your mouth is — if you say you care, give that money back. Don’t give the shares back, give your shares to SoftBank and give them the capital they need to survive.”
‘Expectations are low’
Employees at companies that WeWork had purchased are in some cases waiting to hear about both WeWork’s future and the fates of their own companies. WeWork is looking to sell or shutter noncore businesses to help stem its huge losses.
An employee at one of those companies said she was still waiting on news about the details of any deal and what will happen to her WeWork equity.
“Expectations are low,” she said. “It’s super disappointing as an employee who has high hopes for the business and our equity to see the valuation go so low.”
Still, one former executive highlighted a silver lining: The SoftBank deal will allow WeWork to start moving forward after the tumultuous 10 weeks since the company’s filing to go public set off chaos that derailed its IPO and left the company with a rapidly dwindling cash pile.
“Whatever little my equity’s worth, at least it’ll be worth something,” he said, adding that may not be true for employees who joined after 2015, depending on WeWork’s new valuation. “We’re going to be adults about it now … It’s like a sigh of relief, now that I don’t have to hear about it anymore.”
Other former employees highlighted their disappointment with Neumann’s exit package.
“I am literally sick to my stomach that he is getting $1.7 billion,” one former midlevel executive said.
Another, who has six figures tied up in options, called Neumann a pariah.
“There is no karma,” he said. “Nice guys finish last. That money should go to employees, as should his $700 million.”
Staff also noted their frustration at the lack of clarity on their futures. They’ve been waiting on news about layoffs, which Business Insider reported at the start of the month could comprise up to a quarter of the company’s 12,500-person workforce.
Now WeWork has delayed the layoffs because the company lacks the funding to pay severance, according to a Wall Street Journal report on Monday.
At the last all-company meeting a few weeks ago, a very recent hire had asked about the number of layoffs, one employee said. That question did not receive a specific response. That employee has become a company hero, with memes praising him being posted even today in a company Slack channel, according to a picture reviewed by Business Insider.