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WeWork rescue 'hands co-founder Adam Neumann $1.7bn payout' WeWork accepts multi-billion dollar Softbank rescue deal
(about 7 hours later)
Struggling property firm WeWork has reportedly accepted a rescue deal with a generous payout for controversial co-founder Adam Neumann. Struggling property start-up WeWork has been thrown a lifeline from Softbank, with a multi-billion dollar rescue deal.
The deal will see current investor, Japanese firm Softbank, buy billions more dollars worth of WeWork shares, including almost $1bn from Mr Neumann. In a statement, Softbank said it would provide $5bn (£3.9bn) in new financing and up to $3bn for existing shareholders.
The agreement, which also includes $5bn in debt financing, gives Softbank control of the company. The deal will see Japan's Softbank increase its stake in the US company to around 80%.
It follows the collapse of WeWork's plans to raise money via stock markets. Co-founder Adam Neumann will leave the board but retain "observer" status.
The Wall Street Journal first reported terms of the rescue plan. The bailout follows the collapse of WeWork's plans to raise money via stock markets.
It is said to value WeWork at about $8bn (£6.1bn), a sharp comedown from the nearly $50bn Softbank estimated when it invested in WeWork previously. In addition to new financing and a tender offer for existing shareholders, Softbank said it will "accelerate" an existing commitment to fund $1.5bn.
The Japanese investment giant, which already owned about a third of WeWork, has now spent about $19bn on the firm - more than double the firm's current valuation, according to Reuters. The Japanese investment giant already owned about a third of WeWork.
Reports said that Mr Neumann agreed to back the rescue plan over a rival offer from JP Morgan, in exchange for his shares, a $185m consulting fee and a $500m loan. He is also expected to step down from WeWork's board. He will retain a smaller stake in the company. "SoftBank is a firm believer that the world is undergoing a massive transformation in the way people work," Softbank Chairman Masayoshi Son said in a statement.
'Significant chunk of cash' "Since the vision remains unchanged, Softbank has decided to double down on the company by providing a significant capital infusion and operational support," he said.
Ronn Torossian, chief executive of the public relations firm 5W PR, called the exit package a "win" for Mr Neumann, who was forced out as chief executive last month after WeWork's planned flotation ran into trouble. Investor concerns
"Many CEOs who get pushed out of the company they founded don't exit with a billion dollars plus in cash," he said. "It clearly shows that while Neumann was not right to lead the company at the time, his contributions were large enough to warrant a significant chunk of cash." The deal marks the end of a tumultuous period for the start-up that saw Mr Neumann step down as chief executive as questions over his leadership emerged.
WeWork, which rents shared office space and helped to popularise co-working, has grown from a single office in New York City to more than 500 locations around the world. But it lost about $900m in the first six months of this year.WeWork, which rents shared office space and helped to popularise co-working, has grown from a single office in New York City to more than 500 locations around the world. But it lost about $900m in the first six months of this year.
The firm's share offering received a lukewarm reaction from investors, who raised concerns about the firm's financing and governance. WeWork officially dropped the flotation plan last month.The firm's share offering received a lukewarm reaction from investors, who raised concerns about the firm's financing and governance. WeWork officially dropped the flotation plan last month.
The company is now said to be preparing job cuts and sales of parts of the business in an effort to right its finances.