Japanese telecommunications giant SoftBank takes control of WeWork, giving WeWork founder Adam Neumann the equivalent of nearly $ 1.7 billion to separate most of his ties with the start-up of shared office space, according to The Wall Street Journal and Financial Times . SoftBank will also spend up to $ 3 billion to buy shares owned by its employees and early investors in the company, and it adds up to around $ 5 billion in debt financing to help its start-up. All of this on top of the more than $ 10 billion that SoftBank has already committed to WeWork as its largest investor.
Neumann will allegedly sell a billion dollar value of its WeWork stock to SoftBank as part of the takeover offer. SoftBank will also pay him a $ 1
The agreement, which is expected to be formally announced as early as Tuesday, could help wrap up a wild season of the soap opera that is WeWork. WeWork's business model – renting and refurbishing office space and then renting out smaller places like desks and single offices – had always been investigated. But public perception of WeWork really began to come in January this year when the startup changed its name to The We Company to accommodate new businesses such as a housing game called WeLive and a school called WeGrow.
Things really went off after WeWork delivered papers to the government to become a listed company. When the document went public in August, it raised a serious amount of red flags, from the severe control Neumann and his wife exerted over the company to features that bordered on self-trading (like licensing the "We" trademark to his own company), all at the top of major losses. The draw was quick; in less than two months, Neumann resigned as CEO, and WeWork withdrew its IPO. The startup started spinning off some of the businesses it bought and shuttered others, such as WeGrow.
The startup has also been set on the verge of laying off as many as a few thousand employees, but there is reportedly so little cash at the moment that it would not be able to cover the severance pay required to deduct it, which making the conclusion of the new agreement with SoftBank even more crucial.
WeWork representatives did not respond to a request for comment.