Tuesday 22 October 2019 2:10 pm | Updated: Tuesday 22 October 2019 2:49 pm

Softbank seizes control of Wework in deal netting Adam Neumann $1.7bn

Softbank has won approval from Wework’s board to take control of the struggling office space company, in a deal that nets co-founder Adam Neumann $1.7bn (£1.3bn) but severs most of his ties with the firm.

Neumann will also step down from Wework’s board, the Wall Street Journal reported.

Softbank, which has already pumped at least $10bn into Wework and owns a third of the company, had been eyeing a full takeover after the coworking giant’s botched public listing.

Wework, had risked running out of cash in the coming weeks, chose Softbank’s rescue package over a competing deal put forward by JP Morgan Chase. The company had asked both parties to put forward their proposals before a deadline yesterday.

Sources told the Wall Street Journal that Neumann was expected to sell roughly $1bn of stock back to Softbank, and will also receive a $185m consulting fee. In addition, the Japanese conglomerate is set to extend $500m of credit to the co-founder.

The deal is expected to value Wework at around $8bn, far less than the company had been expected to fetch in its now-abandoned plans for an initial public offering (IPO), and far less than the $47bn valuation it had received in January.

If confirmed, the deal will bring to an end a saga that has rocked the once-revered startup and further efforts to sideline Neumann, who was recently forced to step down as chief executive amid concerns about his management.

The arrangement will also shore up the company’s future following reports that it was at risk of running out of money as early as the beginning of December.

Wework lost $1.9m in 2018, and burned through $2.36bn in the first half of 2019, according to company filings.The company has been downgraded by global ratings agencies Standard & Poor’s and Fitch in recent weeks, pushing its ratings deeper into junk territory.

City A.M. has contacted Wework and Softbank for comment.