A $185 million consulting deal that
SoftBank Group Corp.
signed with WeWork co-founder Adam Neumann upon his departure last year is no longer in place, a WeWork executive chairman said.
“I don’t think that consulting agreement is still in force,” Executive Chairman Marcelo Claure said of the agreement, speaking at The Wall Street Journal’s Tech Live conference, held remotely on Monday. “I think Adam may have violated some of the parts of the consulting agreement, so that’s no longer in effect.”
Mr. Neumann was “incredibly helpful at the beginning” in assisting SoftBank to understand WeWork, he said.
Mr. Claure, who is also a top executive at SoftBank, declined to elaborate on how Mr. Neumann might have violated the agreement, saying it was part of continuing litigation. Mr. Neumann left under a cloud following the office-space operator’s botched attempt at an initial public offering last fall.
As part of the former startup chief’s exit package, SoftBank agreed to buy about $1 billion of stock from Mr. Neumann, refinance a $500 million debt, and pay him $185 million to consult. WeWork employees and others criticized the payments as a sweetheart deal for the co-founder.
A spokesman for Mr. Neumann didn’t provide an immediate comment.
Part of the deal with Mr. Neumann included a provision that he not compete with WeWork for four years, according to a person familiar with the agreement. He is no longer bound by that restriction, the person said. Mr. Neumann didn’t receive the entire $185 million, the person said.
Mr. Neumann sued SoftBank in the spring after the company failed to follow through on its commitment to buy the nearly $1 billion in stock it agreed to purchase.
“We probably were a little too aggressive with WeWork,” added Mr. Claure, when asked whether SoftBank had drawn any lessons from its investment strategy of previous years. “We probably allowed the entrepreneur to work too freely without having the right SoftBank involvement.”
Mr. Claure said WeWork hopes to reach profitability in 2021. “WeWork should have a profitable quarter sometime next year,” he said. “And the year after, WeWork should be a profitable company generating positive cash flow.”
“In order for WeWork to be profitable, we need to exceed 67% to 68% occupancy, and pre-pandemic we were at 80% to 85% occupancy, so all we need to do is come back to similar levels of occupancy,” he said. Mr. Claure didn’t provide the company’s current occupancy rates.
After the pandemic, Mr. Claure predicted companies and employees would embrace a hybrid work model, spending a few days a week in an office, a few days at home and performing some work in remote locations.
“Coming back, everything is going to change forever,” he said. “The people that are thinking, ‘Hey, the pandemic is over and life goes back to normal,’ that’s never going to happen because we’ve changed the way we behave as human beings.”
—Eliot Brown and Maureen Farrell contributed to this article.
Write to Rolfe Winkler at [email protected]
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Appeared in the October 20, 2020, print edition as ‘WeWork Founder’s Pact Called Defunct.’