WeWork co-founder Adam Neumann will reportedly get about $1.7 billion under a deal in which SoftBank will take control of the troubled company.
Under the deal, the potential valuation of WeWork would drop to about $8 billion, a stunning fall from its peak of $47 billion, and an additional embarrasment for a company that was supposed to go public not long ago. Under that new expected valuation, SoftBank (SFTBF) would have put more money into WeWork to date than the company is worth.
Japanese conglomerate SoftBank is the largest investor of The We Company, WeWork’s parent company.
WeWork and SoftBank did not immediately respond to a request for comment.
The We Company was said to be weighing at least two last-ditch financing options this week — the other being a possible loan package put together by JPMorgan Chase — to avoid running out of money after its disastrous attempt at an IPO.
The decision to move forward with SoftBank caps off a dramatic two-month period for The We Company. After filing paperwork for a highly anticipated IPO in August, the company faced a barrage of criticisms for how it operated: It had staggering losses, no women on its board and CEO Adam Neumann had unchecked power and numerous potential conflicts of interest.
Neumann ultimately stepped down as CEO amid reports that investors, including SoftBank , wanted to oust him. But he remained non-executive chairman. He is now expected to step down from the board of directors as part of the latest SoftBank deal, according to multiple outlets.
While the We Company revised its paperwork to appease investors, it was too little, too late. The company was forced to postpone its IPO last month.
Since then, The We Company is said to be focused on belt-tightening. Several of the startups it acquired are reportedly for sale. It is reportedly gearing up for mass layoffs. The company also said it would cease operating its school, WeGrow , after this school year.
If that’s not enough, some of WeWork’s popular phone booths were pulled out of some rental offices due to “potentially elevated levels of formaldehyde.”