Adam Neumann Gets $245M Enhanced Stock Award as Part of WeWork Exit Deal

By:  Benyamin Davidsons

WeWork’s former CEO Adam Neumann got an enhanced stock award worth $245 million to clear the way for a public listing for the shared office company.

As reported by the Wall Street Journal, close to two years ago, SoftBank Group Corp bailed out WeWork, and tried to part ways with co-founder Neumann, offering him a colossal exit package in 2019.  Securities filings from earlier this month show that in February, that exit package got sweeter for Neumann.  The renegotiation seeks to mend the long lasting dispute between him and SoftBank following the embarrassing initial public offering.   The final package also gave him close to $200 million in cash, let him refinance $432 million in debt on favorable terms and allowed an entity Mr. Neumann controls to sell $578 million in WeWork stock.  As per the WSJ, the stock sale was open to all investors while the other benefits were distinctively for Mr. Neumann.

The disclosures were made as WeWork completes a merger with BowX Acquisition Corp., a special-purpose acquisition company. The deal would allow the shared-office company to go public without an IPO, a method growing in popularity among startups, due to more lax regulations.  The award to Neumann, called a profits interest, is similar to a stock option and gives Mr. Neumann gains above a certain minimum share price.  It is meant to encourage Neumann to boost the company’s valuation.

Executive-severance experts say the package being offered to Neumann stands out not only for its size, but also in light of Neumann’s record.  “Generous would be an understatement,” said Conor Callahan, a management professor at the University of Illinois at Chicago who studies severance packages. “It’s going to be something people are going to be very upset about.”   Other former employees will also feel indignant. Over 90% of WeWork’s staff held stock options that were in trouble when the company was bailed out in 2019. Stock options were repriced at a considerably lower price for WeWork employees who stayed at the company as well as those who later got laid off.  Employees who left earlier weren’t offered that benefit.

The sweet deal Mr. Neumann is getting can only be explained in light of the amount of control he had over the company, and is being asked to relinquish.  Neumann had controlled the company by holding stock with 10 times the votes of a normal share, noted Mr. Callahan.