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WeWork's New Chairman Defends Huge Payout To Co-Founder In Rescue Package


10/25/2019


WeWork's New Chairman Defends Huge Payout To Co-Founder In Rescue Package
While defending the $1.7billion payout to Adam Neumann, the co-founder of the United States based office-sharing company WeWork, its new Executive Chairman Marcelo Claure said the company now faces ‘zero risk’ of going bankrupt – potentially hinting at the fortunes of the company after the ouster of Neumann who was the CEO of the company and the member of the company board.
 
“There's a level of gratefulness that we're going to have for Adam, because he's the one who built this business”, Claure, who is also the chief operating officer at SoftBank, said while speaking at a meeting with employees of the company, reported news agency Reuters which claimed ot have heard and reviewed the audio recording of the speech.
 
This meeting was organized a day after the decision of Japan’s investment conglomerate SoftBank to grant an investment of $9.5 billion to WeWork – which is a virtual rescue package of the company, and effectively acquired a majority and controlling stake in the company. That amount included the payout to Neumann to relinquish control of WeWork.
 
Neumann deserved the right to sell his shares because he was like any other shareholder of the company, Claure said while responding to a question from one WeWork employee.
 
According to reports, as much 4000 jobs at the company is being planned to be axed to save costs and stage a turnaround of the company by the new management. If the reports hold true, the company will end up retrenching about one third of the total global workforce of the company. As a part of the turnaround strategy, WeWork will also be divesting a number of businesses that are not part of its core business of office sharing services. For example, the company had recently announced the closure of the WeGrow private school in New York City following the end of the current schooling year.  
 
Even after stepping down as the company CEO, Neumann remained the largest individual shareholder of the company as well as the chairman of WeWork until SoftBank decided to take over the company. He also had special voting rights in the company that effectively gave him complete control over the company.  
 
According to reports, SoftBank had offered Neumann a $1 billion stock buyout, $500 million line of credit, and $185 million 'consulting fee’ as a part of the package for him ot give up control over the company.
 
SoftBanl will also reportedly carry out a share buyout program from the other investors of WeWork and from its employees and has earmarked an additional $2 billion in cash for this purpose. That amount is expected to be much more than the share holding employees of the company had hoped to gain from the now failed attempt to take the company public through issuance of an IPO last month.
 
The SoftBank investment has valued the company at $8 billion which is just a fraction of the $47 billion value that the company got during its last round of funding in January this year. The company’s valuation as estimated by investors before the launch of its IPO was $10 billion according to reports. .
 
(Source:www.dailymail.co.uk)