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SoftBank On Verge Of $500M Settlement With WeWork Founder Adam Neumann

SoftBank Group and former WeWork CEO Adam Neumann, who left the company in 2019 in the wake of an IPO effort that fizzled, are in advanced talks to settle their legal quarrel. Under the terms being discussed, Neumann would receive a $500M payout from SoftBank, The Wall Street Journal reports.

Former WeWork CEO Adam Neumann at the Creator Awards launch in Washington, D.C., in 2017.

SoftBank would pay about $1.5B to buy out the shares of all of WeWork's early investors and employees, including Neumann, the WSJ reports, citing anonymous sources. That is about half of what the company agreed to previously.

As part of SoftBank's rescue of the coworking company in October 2019, SoftBank agreed to a $3B tender offer to buy stock from Neumann and others. Later, the Japanese investor pulled out of the agreement, saying the deal's conditions hadn't been met.

In May 2020, Neumann filed suit against SoftBank. In December, a court in Delaware ruled that Neumann had standing to proceed with the suit.

The Tokyo-based conglomerate is also in talks to take WeWork public not through an IPO but rather a sale to a special-purpose acquisition company affiliated with Bow Capital that would value WeWork at about $10B. Bow Capital is run by Vivek Ranadivé, the owner of the NBA's Sacramento Kings.

SoftBank created its own blank check company last year, but so far it hasn't had anything to do with WeWork. SoftBank's most recent capital infusion in WeWork was $1.1B in senior debt, with its total investment now over $11B, giving it a majority stake. 

Ahead of the failed 2019 IPO, SoftBank's investment rounds in WeWork valued the company at about $47B. Investors balked at buying into the company, however, deeply skeptical that it was on a path to profitability. Settling the legal fight with Neumann and other WeWork investors is understood to be an important step toward any merger with a SPAC, the Financial Times reports.

WeWork had Q3 2020 revenue of $811M, representing an 8% drop from Q2, and burned through $517M of its cash reserves during the quarter. The company still had about $3.6B left at the end of that quarter, but credit rating agency Fitch puts WeWork at serious risk of default, citing permanent damage to its business model due to dampened demand for coworking space.

WeWork has been struggling to make a go of things during the coronavirus pandemic, including staff cuts and closing locations. Most recently, the company cut rental fees by an average of 10%, with some places seeing a 25% cut.

Since the end of his time as CEO at WeWork, Neumann's $185M consulting deal with the coworking giant has ended. More recently, he has been part of a $50M Series A funding round for a mortgage startup, and it was announced that Jared Leto will play Neumann in an Apple TV+ limited series alongside Anne Hathaway as Neumann's wife, Rebekah.