The golden parachute for Neumann was included in a SoftBank rescue deal, formally announced late Tuesday, that will pump billions more into the embattled company after its failed IPO. Neumann will get the ability to sell up to $970 million in stock back to SoftBank, receive a $500 million loan to repay a credit line, and a $185 million fee for consulting for SoftBank, according to a person familiar with the matter.
The bailout leaves Softbank in control of the company and to clean up the mess left behind by Neumann. In company-wide emails sent Wednesday, obtained by CNN Business, WeWork leadership attempted to level with staffers about the remaining questions facing the business. Later, there was an all-hands meeting led by Marcelo Claure, SoftBank’s chief operating officer who became WeWork’s executive chairman as part of the deal.
At the meeting, Claure addressed a question about the payment to Neumann by acknowledging the work he had done for the company, according to two sources familiar with the meeting. Claure explained that while the steps SoftBank took were expensive, they were necessary for it to take control of the business and that Neumann will serve as a consultant to SoftBank and will have a non-compete clause, a third person familiar with the meeting said.
Under Neumann’s leadership, WeWork raised billions of dollars, scaled its coworking operations to hundreds of cities around the world, and was valued at an eye-popping $47 billion during one investment round. But also under Neumann, the company failed spectacularly in its attempt to go public in large part because IPO paperwork revealed his unchecked power and numerous potential conflicts of interest, as well as WeWork’s staggering losses.
Neumann is “probably one of history’s best grifters,” said a former WeWork executive who spoke to CNN Business on the condition of anonymity. “The fact that the company is in this situation is because of direct decisions and actions that he took. He controlled the company.”
WeWork declined to comment for this story.
Neumann stepped down as CEO last month amid reports that some investors, including its largest investor SoftBank, wanted to oust him. Meanwhile, the money-losing company needed a fresh injection of capital. Things were so bad that the company reportedly couldn’t lay off staffers as anticipated because it couldn’t afford to pay severance.
SoftBank will take 80% ownership of the company as part of the deal to pump in $5 billion, as well as accelerate a $1.5 billion equity investment originally due next year. The package values WeWork at $8 billion, just a fraction of its peak valuation.
Neumann wasn’t just any CEO: He harped on the importance of “community” — a word that appeared 150 times in the company’s IPO paperwork — even renaming the company The We Company earlier this year. In a conversation on-stage at the US Conference of Mayors in 2018, Neumann said: “As mayors, as leaders, as CEOs, it is our responsibility to set the trend of the future and the trend of the future is ‘we’ versus ‘me.'”
The generous payout for Neumann felt hypocritical to some.
“You can fault the board, investors — that’s all valid. But [Neumann] was making the decisions and they were believers,” the former executive added.
Others echoed the sentiment. “How on earth can he run the company into the ground and then be paid off? The employees who worked their backsides off to try to make this thing work — and he’s got the chutzpah to turn around and take this money off the table — I think it is disgusting,” another former executive said. “In some way shape or form karma comes back around.”
Former executives and senior leaders told CNN Business that, though their stock options are underwater, they’re more concerned about the employees still at the company who are in more junior positions and may be relying on their equity coming through.
On Tuesday, before the deal’s formal announcement, reports of its details caused a stir within WeWork’s ranks. Staffers sent dozens of messages discussing the reports in internal Slack chat room channels, one employee who spoke on the condition of anonymity told CNN Business.
Some messages viewed by CNN Business highlight unease over how the deal and Neumann’s payout may impact employees. One message suggested that, in light of how much the company talked about the importance of community, Neumann should consider splitting his payout with staff. Another included the hashtag “#WEgotplayed.”
By Wednesday, the company attempted to smooth things over with staffers, who spent most of Tuesday gleaning information from the press.
“While we understand that you have questions about this announcement, we ask that you bear with us as we won’t have all the answers today,” wrote co-CEOs Artie Minson and Sebastian Gunningham in an email to staffers.
Meanwhile, in the other email, Claure informed staff there would be an undetermined number of layoffs.
In the email, Claure wrote that the “past two months have been challenging, and I am not going to minimize those challenges. We have already started making some of the appropriate changes to address them. But it is in these tough times that companies get redefined.”
“To be candid, what we are lacking is focus on our core business: WeWork, along with accountability, and seamless execution,” he added. “The beauty is that this is all within our control. We have a lot of work ahead of us. This work won’t be easy. The path won’t always be smooth. But we will prevail. No excuses.”
In the email, Claure confirmed that there will be layoffs. “I don’t know how many,” he wrote.
At the all-hands meeting Wednesday, Claure said the layoffs will be fair financially and will take equity into account to determine size, according to an employee.
By Sara Ashley O’Brien, CNN Business