WeWork created a lot of financial losers. Adam Neumann wasn’t one of them.
The shared office space company’s co-founder and former chief executive left WeWork four years ago as a billionaire thanks to large stock sales and a lucrative exit package.
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Now, with WeWork in bankruptcy and his remaining shares near worthless, there is a potential for further financial gain for Neumann worth hundreds of millions of dollars.
In late 2019, SoftBank committed billions of dollars to bail out WeWork after the office company’s failed attempt at an initial public offering left it low on cash and heavy on losses. Neumann was ousted by the company’s board, but before he surrendered control of the company he founded, Neumann negotiated significant concessions and payments from SoftBank.
One concession was a roughly $430 million loan from SoftBank to Neumann that had a key feature: Neumann wasn’t personally on the hook for paying it back. Instead, if he stopped paying, SoftBank would be able to seize his shares in WeWork as collateral.
The value of that collateral has plummeted. With WeWork’s stock price near zero, Neumann’s WeWork shares are currently worth $4 million, down from around $500 million in fall 2021, according to FactSet. SoftBank executives worry that Neumann may elect to simply walk away with the money he was lent and hand over the shares, people familiar with the situation said.
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SoftBank doesn’t explicitly disclose the size of the loan, but a person familiar with the details said Neumann still owes hundreds of millions dollars after he paid some of it back in 2022.
Neumann, who once was worth roughly $10 billion on paper at WeWork’s peak, issued a brief statement about the bankruptcy, saying it "has been challenging for me to watch from the sidelines."
That Neumann could leave with a last slug of money is a knock-on effect of the generous terms big investors lavished on tech company founders during the now-ended startup frenzy.
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He’s not the only one who will emerge from the wreckage with cash in hand. Another winner from WeWork’s bankruptcy is part-time SoftBank executive Rajeev Misra.
In February, an investment fund that Misra manages, separate from SoftBank, lent $470 million to WeWork. As part of the deal, SoftBank agreed to pay back the debt—a letter of credit—if WeWork ever failed, securities filings show. It was the latest attempt by SoftBank to salvage the billions of dollars it put into WeWork over the years.
SoftBank provided similar guarantees to other chunks of WeWork debt.
A provision in the borrowing documents proved lucrative for Misra’s Middle East investor-backed fund, One Investment Management, which has around $7 billion under management. The fund was guaranteed 18 months of interest payments by SoftBank, even if WeWork failed, securities filings show.
SoftBank repaid the debt late last month, about halfway through the 18-month term, bankruptcy documents show. That handed Misra’s fund a profit of about $105 million, based on the roughly 15% interest rate, according to filings and a person familiar with the matter. Early repayments can be particularly beneficial for fund managers given that the money can be put to other uses sooner than expected—making more profit still.
The letter of credit effectively put Misra on both sides of the same deal. He still works for SoftBank overseeing its $100 billion Vision Fund, which invested in WeWork in 2017.
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Far more investors, businesses and employees stand to be hurt by the bankruptcy than to gain. WeWork has said it would seek to cancel between 50 and 100 leases, leaving dozens of landlords with no rent. Many of WeWork’s tenants will likely have to scramble to find new office space. WeWork stock is worth a fraction of what it was worth in 2021, when the company went public through a merger with a blank-check company.
But by far the biggest loser in WeWork is SoftBank.
The company put more than $10 billion into WeWork under Neumann, only to double down when he was ousted in 2019. It guaranteed up to $5 billion in new debt and bought more shares in the then-private company.
The bankruptcy threatens to wipe out most of that debt and all of the remainder of its investment.
The company has now lost more than $14 billion on the roughly $16 billion it put into WeWork through loans and investment, SoftBank said in its quarterly earnings Thursday. The Japanese conglomerate lost more than $6 billion in the three months through September thanks to the decline in its WeWork holdings and other startup investments.
SoftBank’s embrace of WeWork stands out as one of the all-time worst investments in a startup and an enormous amount of money to spend on a company in the business of leasing desks and offices.
By comparison, competitor IWG has similar revenue to WeWork and has a market capitalization of about $1.7 billion.
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The tally of SoftBank’s losses doesn’t include the debt to Neumann or other payments made to him.
Neumann now runs a new real-estate startup backed by $350 million from tech investor Andreessen Horowitz. The apartment-rental company includes some buildings Neumann purchased with money he made through WeWork.
When WeWork was private, an entity controlled and mostly owned by Neumann sold more than $1 billion in stock—mostly to SoftBank—in numerous sales over a decade. SoftBank also agreed to give him about $200 million in other direct payments related to his exit.
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WeWork in 2019 also agreed to cover numerous expenses worth $1.75 million that Neumann owed the company, company documents reviewed by The Wall Street Journal show. The payments included reimbursements for Neumann’s personal private-jet travel.
