A rough year for WeWork got even worse on Thursday, when Japan’s SoftBank announced its decision to pull back a $3 billion share offer that would have given SoftBank control of the struggling office space start-up.
For Adam Neumann, WeWork’s co-founder and former CEO, the announcement also means that Neumann will lose an opportunity to sell as much as $970 million of his own shares in the company to SoftBank as part of the now terminated deal.
Between the SoftBank deal falling through and WeWork’s declining valuation, Neumann’s net worth has plummeted in the past year, though estimates vary on just how much it’s dropped off. For instance, Forbes estimated Neumann’s net worth at around $4.1 billion at the beginning of 2019, compared to the publication’s current estimate of $750 million.
But Bloomberg paints an even starker picture, estimating that Neumann’s personal net worth fell by 97% in less than a year — from almost $14 billion last summer to a current estimate of $450 million — according to Bloomberg’s Billionaire’s Index.
At this time last year, WeWork was still riding fairly high. The office space start-up had been valued at $47 billion in January 2019 following a $2 billion investment from SoftBank that brought the Japanese conglomerate’s total investment in WeWork at that time to more than $10 billion.
Both companies planned for WeWork to realize that valuation in an IPO that had been planned for September 2019. But, WeWork’s public prospectus filing in August showed $900 million in losses over the first six months of 2019, revealing major cracks in the company’s business model that eventually sank the planned IPO before it launched.
Neumann stepped down as CEO of the company in September, citing the “significant distraction” of the public scrutiny of his leadership.
Still, in October, SoftBank said it would bail out WeWork by investing another $3 billion that would give the Japanese company control of the start-up. The deal valued WeWork at roughly $8 billion, or less than one-fifth the company’s valuation just eight months earlier.
At the same time, Neumann agreed to give up his voting rights in WeWork and walk away from the executive board of the company he founded in 2010 as an “eco-friendly co-working space.” In exchange, SoftBank paid the co-founder a $185 million “consulting fee” and gave him a credit line of $500 million. Neumann would also have the right to sell as much as $970 million of his WeWork shares to SoftBank upon the close of the deal.
However, with SoftBank now deciding to terminate that deal, Neumann will no longer be able to cash in his WeWork shares under that agreement.
Neumann, who is also reportedly under investigation by the New York State Attorney General over allegations of self-dealing, will instead hold onto a larger chunk of WeWork shares. (Neumann has previously declined to comment on the reported investigation and a spokesperson for the WeWork co-founder did not immediately respond to CNBC Make It’s request for comment.) Neumann had a reported 22% stake in the company that would have shrunk to the “low double-digits,” CNBC previously reported.
However, those shares are now likely worth considerably less than their value would have been in the SoftBank deal. The Japanese company had agreed to buy shares from WeWork’s employees and investors for $19.19 per share. But, in November, WeWork set a price of $4.12 per share for employees’ stock options, according to Bloomberg.
A WeWork spokeswoman declined to comment for this article, while SoftBank did not immediately respond to CNBC Make It’s request for comment.
But, in a letter obtained by CNBC Make It, WeWork’s current executive chairman, Marcelo Claure, and CEO Sandeep Mathrani told the company’s investors that WeWork “has a strategic plan and a sound financial position,” reiterating that the company currently has $4.4 billion in cash and cash commitments.
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