U.S. Markets closed

WeWork Staff, Facing Job Cuts, Express Outrage at Founder Payout

Ellen Huet and Gillian Tan
WeWork Staff, Facing Job Cuts, Express Outrage at Founder Payout

(Bloomberg) -- WeWork will narrowly avoid financial ruin and in the process, reward its former leader, Adam Neumann, with as much as $1.2 billion. The reaction from his ex-colleagues, who are still facing the prospect of mass job cuts and a corporate crisis: “You’ve got to be kidding me.”

That was one of the comments posted on WeWork’s staff-wide communications system Tuesday, reflecting a broader mood throughout its headquarters in New York. Dozens of employees expressed indignation in interviews and messages to colleagues on company Slack channels that were relayed to Bloomberg. They requested anonymity in a bid to protect their jobs, as management weighs the dismissal of thousands of employees.

WeWork’s board agreed Tuesday to take a bailout from SoftBank Group Corp., which will secure an 80% stake. The Japanese conglomerate will provide $6.5 billion to the business as it’s on the verge of running out of money. SoftBank will also buy as much as $3 billion in stock from shareholders at the lowest price since at least 2015. Almost a third of that offer may be allocated to Neumann, in addition to a consulting fee of about $185 million, a $500 million credit line and the ability to appoint two board members later. In exchange, Neumann will step down from his role as chairman.

Most employees who sell their shares to SoftBank will do so for less than the paper value of their stakes when they were issued. Mike Adams, who sold a startup to WeWork, described the payout to Neumann as an “injustice.” Representatives for Neumann and WeWork declined to comment. A spokeswoman for SoftBank didn’t immediately respond to a request for comment.

In a statement announcing the deal, SoftBank founder Masayoshi Son said he’s “committed” to WeWork and its employees. WeWork’s co-chief executive officers, Artie Minson and Sebastian Gunningham, said the agreement with SoftBank will enable growth for the company and financial opportunities for employees and other shareholders.

Neumann, 40, built WeWork into a global real estate company fueled by relentless optimism and billions of dollars in investment capital and debt. His sermons about community and mission engendered fierce loyalty among staff and investors for years. But his aura vanished over the last couple months when public investors were given a closer look at the business ahead of an initial public offering. WeWork’s parent company, We Co., abandoned the IPO, and SoftBank helped oust Neumann as CEO.

In recent weeks, an executive exodus and cost-saving measures had already dampened morale. Especially in satellite offices, many workers had stopped coming into work. News of Neumann’s “platinum parachute,” as one former employee described it, made things a lot worse this week.

A link to a news article about the deal on WeWork’s Slack network Tuesday drew more than 100 “thumbs down” emoji from employees. Several workers noted the irony that WeWork could not afford payroll costs associated with the planned job cuts but that its largest shareholder agreed to pay a hefty fee to Neumann. One post read: “So we’re too broke to pay employees severance, but Adam gets $200m?”

Another employee posted a photo of the orphan from “Oliver Twist” with the caption: “Please, Masayoshi Son, can I have some severance?”

Neumann was the main subject of ire from staff, but some complaints were also pointed at the pair of men who replaced him as CEO last month: “Seriously, where’s the email from our co-CEOs or whoever’s running the company now?”

(Updates with statements in the fifth paragraph.)

To contact the reporters on this story: Ellen Huet in San Francisco at ehuet4@bloomberg.net;Gillian Tan in New York at gtan129@bloomberg.net

To contact the editors responsible for this story: Mark Milian at mmilian@bloomberg.net, Anne VanderMey

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.