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After erasing over $ 30 billion in projected shareholder value, Adam Neumann will walk away from the We Company with a $ 1.7 billion payout, according to a report in the Wall Street Journal

This is how the company will end, not with the pop of a successful public offering, but with a whimper from defeated investors probably tired after the months-long saga of trying to make sense of how a clever real estate plan ballooned into one of the greatest swindles in venture capital history.

Already ousted as the company’s chief executive, Neumann controlled shares of the company that gave him what amounted to significant control even after his removal.

The We Company drama has it all. Complacent directors, horrible management, rapacious greed — wrapped in a package of holistic spirituality and the invention of a new kind of conscious capitalism. Even if it was ultimately a capitalism that was conscious only of its ability to deceive.

As Neumann leaves, Softbank will gain control of the company it had once valued at $ 47 billion, but at a far more modest $ 8 billion figure. Still, the bid was more attractive to We Company’s board of directors than a competing offer from JPMorgan Chase, according to the Journal’s reporting.

Under the terms of the deal, Softbank will buy nearly $ 1 billion in stock from Neumann, who was already forced out from the company he co-founded as public markets balked over his managerial acumen. The Japanese conglomerate, which had pushed up the private market valuation of WeWork through its $ 100 billion Vision Fund, will also stake Neumann $ 500 million in credit to repay a loan facility and give him a $ 185 million consulting fee.

Even with the Hindenburg-level catastrophe that Neumann piloted as the chief executive of the money losing real estate venture, the former chief executive will still retain a stake in the company and remain an observer on the board of directors.

In all, Softbank is putting in a tender offer for as much as $ 3 billion to go to the company’s employees and other investors. In fact, WeWork needs the money to be able to afford the layoffs it reportedly wants to make as it tries to right the ship.

People with knowledge of the company’s plans said the decision could be announced today, according to the Journal’s reporting.

Part of the reason for the $ 500 million loan was that Neumann’s removal from the executive role at the company risked putting him in default with his JPMorgan loans.

WeWork revealed an unusual IPO prospectus in August after raising more than $ 8 billion in equity and debt funding. Despite financials that showed losses of nearly $ 1 billion in the six months ending June 30, the company still managed to accumulate a valuation as high as $ 47 billion, largely as a result of Neumann’s fundraising abilities.

“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement confirming his resignation last month. “Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”

 


TechCrunch

Adam Neumann may be out of the daily flow of WeWork, but he seemingly remains top of mind to some of the company’s bankers.

According to a new Business Insider piece, Neumann is working with JPMorgan, UBS, and Credit Suisse to consider new terms for a $ 500 loan that he took out before WeWork filed to go public, and from which Neumann has already drawn down $ 380 million. Since he can no longer pay the loan with proceeds from selling WeWork shares publicly (it yanked its S-1 earlier this week), he may have to put up some of his properties or other assets as collateral for the loan, according to one of BI’s sources.

“No terms have been set,” a spokeswoman for Neumann tells the outlet.

Per earlier reports, Neumann has plenty to offload if it comes to it, having acquired numerous residential and commercial properties over the years.

Among his reported investments is a $ 10.5 million Greenwich Village townhouse; a farm in Westchester, New York; a home in the Hamptons where he reportedly weathered the storm with his family ahead of resigning as CEO last week; and a $ 21 million, 13,000-square-foot house in the Bay Area with a guitar-shaped room.

According to an earlier WSJ report, Neumann has also bought several properties through investor groups that he had leased back, in some cases, to WeWork.

WeWork, and Neumann, have both enjoyed a close relationship with JPMorgan in recent years. As recently reported in the NYTimes,  JPMorgan “lent Mr. Neumann money personally (with his inflated shares as collateral), provided equity and debt for the company, served as a corporate adviser for the I.P.O. and secured nearly $ 6 billion in financing as part of the now scotched offering.”


TechCrunch

Adam Neumann, the co-founder and chief executive of the international real estate co-working startup, WeWork, has reportedly cashed out of more than $ 700 million from his company ahead of its initial public offering.

The size and timing of the payouts, made through a mix of stock sales and loans secured by his equity in the company, is unusual considering that founders typically wait until after a company holds its public offering to liquidate their holdings.

Despite the loans and sales of stock, first reported by The Wall Street Journal, Neumann remains the single largest shareholder in the company.

According to the Journal’s reporting, Neumann has already set up a family office to invest the proceeds and begun to hire financial professionals to run it.

He’s also made significant investments in real estate in New York and San Francisco, including four homes in the greater New York metropolitan area, and a $ 21 million 13,000 square-foot house in the Bay Area complete with a guitar shaped room (I guess a fiddle would be too on the nose). In all, Neumann reportedly spent $ 80 million on real estate.

Neumann has also invested in commercial real estate (the kind that WeWork leases to provide workspace with more flexible leases for companies and entrepreneurs), including properties in San Joes, Calif. and New York. Indeed four of Neumann’s properties are leased to WeWork — to the tune of several million dollars in rent. According to the Journal, Neumann will transfer those property holdings to a WeWork-controlled fund.

The WeWork chief executive has also invested in startups in recent years. He’s got an equity stake in seven companies including: Hometalk, Intercure, EquityBee, Selina, Tunity, Feature.fm, and Pins, according to CrunchBase.

The rewards that Neumann is reaping from the loans and stock sales are among the highest recorded by a private company executive. In recent years, Evan Spiegel sold $ 8 million in stock and borrowed $ 20 million from Snap before its 2017 public offering and Slack Technologies chief executive Stewart Butterfieldsold $ 3.2 million of stock before Slack’s public offering in June.

The only liquidation of stock and other payouts that have been disclosed which come close to Neumann’s payouts are the $ 300 million that GroupOn co-founder Eric Lefkofksy’s sold before his company’s IPO and the over $ 100 million that Mark Pincus took off the table ahead of Zynga’s offering.

WeWork declined to comment for this article.

 


TechCrunch

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