What Beats a Golden Parachute? WeWork’s Adam Neumann to Receive $1.7B
WeWork employees are apparently furious that CEO and founder Adam Neumann is being paid by SoftBank (OTCMKTS:SFTBY), as part of a $5 billion bailout deal, $1.7 billion to walk away from his company and I am left wondering if I went into the wrong line of work. The break-down on this total amount includes a $1 billion payment for Neumann’s WeWork stock, a $185 million consulting fee and a $500 million dollar line of credit. The company, after having already invested more than $10 billion into the office space start-up, and that is probably functioning about as well as Office Space, is lining up another $5 billion in debt financing to attempt to save the fledgling company in a takeover.
WeWork has flirted with disaster since it originally filed paperwork with the government to go public and it was shown the company was suffering massive losses, unscrupulous self-dealing behaviors and questionable governance with an unduly amount of control vested with Neumann and his spouse. They are currently swirling in rumors of insolvency with reports that the company is not even able to perform layoffs because it does not have the funds available to pay for employee severance. Which begs the question, do they have the funds to pay their employees either?
With these issues, it absolutely boggles the mind Neumann is able to receive such a large compensatory amount. After seeing the valuation of WeWork fall from a lofty $47 billion just a few short months ago, to an estimated valuation based on the latest bailout financing of only $8 billion, I think the employees, in this case, have a significant right to be furious. This also puts a large black eye on the face of SoftBank, which in this case needed to perform a lot more research and due diligence before investing in a company like WeWork. Office Space leasing and refurbishment is not exactly a “Tech” industry regardless of what a company wants to call itself. It also does not appear that the company was following industry best practices and was operating mostly on the backs of investors piling in more and more capital.
Part of investing is to know when to let go and take the loss and move on. It looks like in this case SoftBank is hoping they can turn WeWork around and turn it into a profitable company. It’s entirely possible that they can accomplish this but just like with Sprint, there is also the possibility they will endlessly prop up the company with ongoing bailouts and hope to merge or sell it later. For other companies that are looking to perform an IPO, I should hope this is a warning to them that they need to focus on a clear path to profitability and show results rather than empty promises.