WeWork Employees Call Out Ex-CEO Adam Neumann’s ‘Platinum Parachute:’ Term Sheet

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People exit the WeWork Cos. 32nd Milestone co-working space at night in Gurugram, India, on Monday, Feb. 18, 2019. The New York-based co-working giant WeWork Cos, which operates shared office spaces around the world, has attracted huge piles of investor money, which it uses to snap up office space in the largest cities on earth. Photographer: Ruhani Kaur/Bloomberg via Getty Images

Ruhani Kaur—Bloomberg via Getty Images

“You’ve got to be kidding me.” 

That was one of the comments posted on WeWork’s staff-wide
communications system Tuesday, according to a Bloomberg report
(paywalled link). Dozens of employees expressed indignation in messages to
colleagues on internal Slack channels. 

The outrage comes after Softbank agreed to provide WeWork $5
billion in new financing and up to $3 billion in a tender offer for existing
shareholders. Softbank will also speed up an existing $1.5 billion financing
commitment. After closing, and following the tender offer, Softbank will own
approximately 80% of the co-working giant.

The deal will value WeWork at approximately $8 billion.
Ex-CEO Adam Neumann has the right to sell $970 million of shares, or roughly
one-third of his stake, in the tender offer.

As Neumann walks away a billionaire, 90% of current and former employees are left holding stock options that are under water at the roughly $20-a-share valuation implied by the SoftBank deal. They’re expecting thousands of layoffs. 

More from the Bloomberg report: 

  • Mike Adams, who sold a startup to WeWork, described the payout to Neumann as an “injustice.”
  • Another former employee described Neumann’s deal as a “platinum parachute.”
  • Another: “So we’re too broke to pay employees severance, but Adam gets $200m?” Several employees reportedly noted the irony that WeWork could not afford severance to people it planned to lay off, but that SoftBank agreed to pay a hefty fee to Neumann. 

After my comments
about how many WeWork employees were left high and dry, some Term Sheet readers
weren’t as sympathetic. One tweeted:
“At some point there is responsibility on the employee who takes a job to work
at a company that has a) never proven it can turn a profit and b) is
hemorrhaging billions a year.”

Another emailed: “Hard to feel sorry for them when (a) there
have been deep concerns about the valuation and business model for a long time
and (b) the vast majority of start-up employees never cash out of their
options.”

Even so, I stand by my comments. 

There were red flags along the way, but all hell broke loose
only after WeWork’s S-1 revealed the reality of the company’s financial woes.
In 2018, I wrote about
the big lessons Silicon Valley could learn
from the Theranos scandal. One
of the central points was that accountability, transparency, and verification
are king — especially when there’s big money on the line. But as USVP’s Dafina Toncheva
said
, “I have noticed that when a company is doing well and growing
rapidly, private investors tend to forgive more.”

And so, we shouldn’t be surprised when history repeats
itself.

Read
more.

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