WeWork Abandons SoftBank, Pulls Part Of Rescue Package Over Federal Investigations

With the coronavirus punishing anyone and everyone with exposure to the global financial markets, companies like SoftBank, which was already reeling from last year’s unicorn massacre and the implosion of the WeWork IPO, are finding themselves in an extremely precarious position.

So who could blame them for getting a little squirrelly? Probably not Elliott Management, which now has a vested interest in the SoftBank turnaround.

With that stress in mind, hardly surprising that the company is apparently moving to pull back some $3 billion that it agreed to handover to WeWork insiders as a payoff to allow SoftBank to seize control of the office-leasing company and save it from spiraling into bankruptcy following the collapse of the IPO and JPM-led credit line tied to the offering.

According to WSJ, SoftBank has found a loophole allowing it to reneg on its agreement to purchase shares from WeWork insiders as part of the rescue package, including its agreement to buy shares from founder and former CEO Adam Neumann. Neumann had the right to sell up to $970 million in stock as part of the October deal that led to his ouster from the company’s board and from his CEO spot. The package ultimately allowed him to walk away from the company with more than $1 billion.

However, it looks like he might soon be giving back the bulk of that money in exchange for WeWork shares that probably aren’t worth the paper they’re printed on (it’s an expression).

As WSJ adds, the move doesn’t necessarily mean SoftBank is walking away – the decision could be intended to exert leverage over WeWork’s new management team, which was hand-picked by SoftBank. The deal notably doesn’t affect the $5 billion SoftBank pledged as part of the turnaround effort, some $1.5 billion of which has already been “invested” (i.e. squandered) by the company.

But regardless of SoftBank’s motives, it looks like CEO Adam Neumann, who committed every financial sin imaginable, including badly overextending himself financially by borrowing against his WeWork shares to buy illiquid assets like commercial real estate, might finally be getting his comeuppance for leading the company into the ground.