Some of WeWork’s earliest employees fear becoming collateral damage in a $3bn fight between its co-founder Adam Neumann and SoftBank, saying that they will pay the price if the Japanese group walks away from a pledge to buy their shares in the lossmaking office company.
Masayoshi Son’s indebted technology group, which rescued the cash-strapped US company last October, warned last week that conditions attached to the tender had not been met, citing regulatory investigations into WeWork and a failure to complete a planned share swap with partners in two Asian joint ventures.
Pulling the tender would also endanger $1.1bn in debt financing SoftBank had planned to provide.
Under fire from a special committee of WeWork directors, SoftBank has painted the tender as something that would mostly benefit Mr Neumann and institutional investors led by Benchmark Capital.
WeWork employees had already “benefited greatly” from an earlier repricing of share options and stand to receive less than 10 per cent of the proceeds of the tender, or under $300m, the Japanese group said earlier this week.
Among those smaller shareholders, however, five current and former employees told the Financial Times that SoftBank’s threat would leave them out of pocket at a moment of economic crisis.
“The public wants Adam and Benchmark to suffer but they’re forgetting that there are people who gave up the peak of their careers to build this company,” one former employee said, adding that some ex-colleagues had borrowed money to exercise options in anticipation of the tender.
“SoftBank was fully aware of everything that was going on in WeWork over the past three years. It’s not like they didn’t know,” he added.
SoftBank and WeWork declined to comment.
A second former employee said he had spent $35,000 to exercise his options on leaving the company last year. “People have planned lives based on having this money. They’re going to get wiped out,” he warned.
Many of those at risk of losing out are among WeWork’s earliest employees. More recent hires are less likely to take up the tender offer, as most staff joined when its shares were valued above the $19.19 level at which SoftBank’s offer was priced, meaning they could have to pay more to exercise the options than they would recoup from the tender.
One of those people cited the fact that SoftBank’s warning had come as the economic crisis induced by the coronavirus pandemic had left former colleagues alarmed about their financial prospects.
“Obviously we’re in extremely tough economic times and I think a lot of people, including myself, are depending on this deal, which is what it is — a deal,” he said. “I’m not buying a mansion anywhere but . . . the economy just took a giant hit and any time there’s capital it’s important.”
Mr Neumann could tender between $800m and $970m of his stock if the offer proceeds, and Benchmark could recoup up to $626m. A few institutional investors and former senior executives were in line for most of the rest of the sum SoftBank has offered.
Relations between SoftBank and Mr Neumann should not enter into the Japanese group’s calculations, one early employee argued. “If this has to do with them and Adam they should work that out on the side,” he said.
“Nobody wants [Mr Neumann] to walk off with billions of dollars but if that means we don’t get anything then OK, he gets what he gets and we get what we get,” one longstanding current employee echoed. Like many early joiners, much of her compensation had been in stock, she said: “The people that are counting on [the money from the tender] are the people that really built the company.”
Another recent leaver said “there are some people who are definitely going to be in a tough spot” financially if the tender does not proceed on April 1 as originally planned. “I’m not a millionaire but this is something [we] were planning on.”
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