Adam Neumann's final WeWork act: helping SoftBank's SPAC deal

Wework

29/03/2021 13:15

(Adds that WeWork declined to comment)
    By Joshua Franklin and Anirban Sen
    March 29 (Reuters) - An unlikely figure helped set the spark
for SoftBank Group Corp's  9984.T  $9 billion deal to take
WeWork public. 
    Adam Neumann, WeWork's co-founder and ousted chief
executive, met in November with the head of the special purpose
acquisition company (SPAC) that would go on to clinch a deal
with WeWork, according to people familiar with the matter.
    Neumann was locked in a fierce legal battle at the time with
SoftBank over a $3 billion deal for a portion of his and other
investors' stake in the office space-sharing company. 
    The introduction between Neumann and BowX Acquisition Corp
 BOWX.O  co-chief executive Vivek Ranadivé over a Zoom call was
facilitated by a senior UBS Group AG  UBSG.S  capital markets
banker, the sources said. It preceded discussions the SPAC chief
had with WeWork.
    Neumann played up WeWork's prospects on the call and the
conversation piqued Ranadivé's interest, the sources said. 
    Ranadivé's SPAC had been looking for an acquisition target
after raising $420 million in an IPO in August.
    The ensuing deal announced on Friday cushions some of the
blow SoftBank has suffered with its investment in WeWork. It has
invested at least $18.5 billion in WeWork since 2017, including
$6 billion when a fundraising round valued the startup at $47
billion in January 2019.
    The sources described the meeting between Neumann and
Ranadivé on condition of anonymity. Representatives for Neumann,
WeWork, UBS and SoftBank declined to comment. Ranadivé did not
respond to multiple requests for comment. 
    Neumann, who has kept a low profile since his unceremonious
ouster after WeWork's failed IPO attempt in 2019, has had a
contentious relationship with SoftBank.
    The Japanese tech investment giant pushed for his ouster
before it took over WeWork in a $10 billion rescue financing
deal in October 2019. It later backtracked on an agreement to
buy $3 billion of WeWork shares from Neumann and other
investors, citing criminal and civil investigations into WeWork,
the company's failure to restructure a joint venture in China,
and the shift to remote work due to the COVID-19 outbreak.
    One week before the case was due to go to trial, SoftBank
reached a settlement with Neumann and other investors in
February to pay out about half of its original commitment. It
did not want the potential legal liability to jeopardize the
SPAC deal, the sources said. 
    Neumann also stands to benefit from the SPAC deal as he
still has a roughly 10% stake in WeWork, worth around $790
million.
    
    LIMITED OPTIONS
    Neumann had no role in the SPAC deal after his discussion
with Ranadivé, the sources said. Ranadivé and his team began
discussions with WeWork in December. SoftBank Chief Operating
Officer and WeWork Executive Chairman Marcelo Claure led the
negotiations on behalf of SoftBank, with SoftBank CEO Masayoshi
Son also stepping in, one of the sources said.
    WeWork was apprehensive about opting for a traditional IPO
following its failed attempt in 2019, and its options for a SPAC
deal were limited. BowX was the only SPAC that expressed a
serious interest in WeWork, two of the sources said.
    Ranadivé, a 63-year-old technology executive turned investor
and owner of the Sacramento Kings basketball team, said last
week WeWork stood to benefit from a shift by many companies to a
hybrid model of working that calls for employees to come in to a
workplace just a few days a month.
    He called the shift a tailwind for WeWork.
    The deal was received well by Wall Street, with BowX shares
ending trade on Friday up 20% following the merger's
announcement.  urn:newsml:reuters.com:*:nL4N2LO2G8
    WeWork's valuation was revised down in the final stages of
the negotiations. Investors participating in the private
investment in public equity (PIPE) transaction managed to drive
down WeWork's valuation in the agreement from $9.9 billion to $9
billion, including debt, the sources said. The size of the PIPE
increased to $800 million from $500 million. 
    Ranadivé and the rest of the BowX senior team will receive
WeWork shares worth almost $90 million after investing $11.7
million of their own money. They will be restricted from selling
these shares for the first year unless certain share price
targets are met. 

 (Reporting by Joshua Franklin in Boston and Anirban Sen in
Bangalore; Editing by Greg Roumeliotis and Edwina Gibbs)
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Messaging: joshua.franklin.thomsonreuters.com@reuters.net))