SoftBank has formed a takeover deal with WeWork and co-founder and former CEO Adam Neumann will receive around $1.7 billion as part of the agreement.
The troubled commercial real estate company WeWork has created a deal with Japanese conglomerate SoftBank for a takeover that will grant about $1.7 billion to former chief executive officer (CEO) and co-founder Adam Neumann.
Under the agreement, WeWork's potential valuation would significantly fall from its peak of $47 billion to around $8 billion. This valuation is far below the investments made to date by SoftBank, the largest investor of The We Company.
Following the failure of its planned initial public offering (IPO), the We Company was considering two financing options to avoid running out of money, one was the takeover and the other was a possible loan package put together by JPMorgan Chase.
The company filed for a highly anticipated IPO in August but criticisms were thrown its way due to how it operated, including its large losses, the lack of women on its board, and then-CEO Neumann's unchecked power and various conflicts of interest. While the We Company attempted to revise its IPO paperwork to please investors, it was too late and it was forced to postpone its IPO in September.
Eventually, Neumann resigned as CEO amidst reports that investors, including SoftBank, wanted to oust him. While he vacated the CEO post, he remained as a non-executive chairman of WeWork.
However, according to reports, part of the deal with SoftBank requires Neumann to also step down from the company's board of directors.
Prior to the deal, the company has been reported to be selling several of the startups that it acquired and is preparing for mass layoffs. The cost-cutting initiatives will also include stopping the operations of WeWork's school, WeGrow, after the school year finishes.
In other news, the company was forced to pull out thousands of its phone booths from its rental offices due to "potentially elevated levels of formaldehyde."
