WeWork founder Adam Neumann will get a payout up to $1.7 billion under a bailout deal that will give SoftBank 80% ownership of the beleaguered startup company.
As part of the bailout, Neumann will reportedly sell $1 billion worth of WeWork stock to Softbank. Softbank will pay him a $185 million consulting fee and will and give him a $500 million line of credit to pay back loans.
WeWork said the bank had agreed to provide $5 billion in new financing and launch a tender offer of up to $3 billion for existing shareholders. It would also be accelerating an existing commitment to fund $1.5 billion.
“The funding provides WeWork with significant liquidity to execute its business plan to accelerate the company’s path to profitability and positive free cash flow,” WeWork said in a statement.
The new debt consists of $1.1 billion in senior secured notes, $2.2 billion in unsecured notes, and a $1.75 billion credit facility.
SoftBank is already WeWork’s largest investor, owning a reported 30% stake with its Vision Fund, but WeWork said SoftBank will not hold a majority of voting rights at any general stockholder meeting or board of directors meeting and does not control the company. WeWork will be an associate of SoftBank.
“It is not unusual for the world’s leading technology disruptors to experience growth challenges as the one WeWork just faced,” SoftBank CEO Masayoshi Son said in a statement.
Under the deal, SoftBank Group chief operating officer Marcelo Claure will become executive chairman of WeWork after the accelerated $1.5 billion payment closes.
“The new capital SoftBank is providing will restore momentum to the company and I am committed to delivering profitability and positive free cash flow,” Claure said.
Neumann, who was replaced by co-chief executive officers Artie Minson and Sebastian Gunningham in September, will become a board observer.
CNN, citing a person familiar with the matter, said the investment package values WeWork at about $8 billion, a dramatic drop from its peak of $47 billion.
SoftBank’s stock dropped 2.5% following the announcement.
Michael Kovac/Getty Images for WeWork