An employee uses a soundproofed privacy booth at a WeWork space in London.
Luke MacGregor/Bloomberg
Software engineer Kevin Hsieh, 30, joined WeWork six years ago with hopes that the high-flying shared-office startup would change the way people work — and that he would get rich. “We were sold on this idea that it was going to be a rocket ship,” he says.
And at first, those dreams appeared to come true, as venture capitalists pushed the valuation of the company to $47 billion by January 2019. Then WeWork’s hoped-for initial public offering collapsed last fall, and SoftBank, its largest investor, bailed it out, setting aside $3 billion to buy out existing shareholders. When Hsieh resigned in February, his shares were worth about $500,000 at SoftBank’s $19.19-per-share offer, and he planned to use the proceeds to pay off his partner’s student loans and help out his family.
But this month SoftBank abandoned the buyout — known as a tender offer — dashing the hopes of many, including Hsieh. “We kind of felt betrayed,” he says.
Nearly every person hired at WeWork received options as part of their compensation, including cleaners, architects and sales managers. About 1,500 current and former WeWork employees were eligible for the failed offering, and about 900 had signed up to participate in it, according to SoftBank. They are now stuck with the shares they hoped to sell, though their total take is in dispute.
SoftBank says employees stood to gain $283 million, while people close to the WeWork board put the number at $450 million. Documents provided to Forbes by another party not linked to SoftBank or WeWork’s board put the figure at $580 million.
Whatever the final number, it’s a pittance compared to the roughly $2.5 billion that the company’s investors and its mercurial co-founder Adam Neumann stood to get. But for them it meant a lot. “A lot of bodies have been left on the side of the road on this one,” says one former employee.
“It’s almost like watching these gods dispute.”
Forbes spoke to more than a dozen current and former WeWork employees who have waited years to sell their equity in the company. One was counting on SoftBank’s share purchase to pay off a mortgage. Others were banking on it to pay costly medical bills, send kids to college or have some cushion as the economy tanks. Most declined to speak publicly, fearing it would violate non-disclosure agreements or jeopardize their chances of securing payment later. Current employees feared WeWork might fire them.
“Part of the pain I am feeling right now is knowing what that could have been,” says an entrepreneur who sold his company to WeWork and worked there for several years afterwards. “The company I built is gone.”
These current and former employees are stuck in the middle of what’s shaping up to be a board battle of historic proportions. After SoftBank abandoned its buyout, which was to be completed on April 1, longtime board members Bruce Dunlevie of Benchmark and Lew Frankfort, the former CEO of Coach, filed suit in Delaware’s Court of Chancery on behalf of all minority shareholders, alleging SoftBank executives immediately took steps to sabotage the deal. (In a statement, SoftBank described the suit as “a desperate and misguided attempt now to rewrite that agreement and to rewrite the history of the past six months.”)
Neumann, who sold $360 million worth of shares in two previous tender offers, had an option to sell up to $970 million worth of shares in this one — a perceived golden parachute that prompted outcry after he led the company to massive losses. He is considering his own lawsuit, a source close to him tells Forbes.
“We were essentially getting shortchanged on salary.”
The abandoned tender offer is the latest blow to morale for employees who have ridden WeWork’s highs and lows. After the company imploded last year — its valuation dropped more than 80% to $8 billion — at least 2,650 were laid off, while the 11,000 still employed wonder how long it can last. Since the coronavirus outbreak sent workers across the country home, WeWork’s 739 locations have stood mostly empty, forcing the company to renegotiate its lease commitments with its landlords. But it has continued to keep its doors open, even offering $100-per-day bonuses to employees to keep showing up, despite withering criticism.
Some current and former WeWork employees are now considering a class action lawsuit over the tender offer, according to those who spoke to Forbes. Others wish SoftBank would forget Neumann and other big investors and make a deal directly with employees. Otherwise, they assume they will never see another dime from WeWork, since investors who own more valuable preferred stock would be paid out before the common stock owned by employees if the company filed for bankruptcy.
“It’s almost like watching these gods dispute,” Hsieh says. “Watching them fight and then just having to reckon with the fallout.”
Like many high-flying startups, WeWork used the promise of equity and the specter of a big payout as a recruitment and retention tool. Offer letters included base salary, as well as an equity value.
“They can afford to pay.”
One early WeWork employee who has since left the company recalled salaries starting at $36,000, and going up to $60,000 for more senior roles, with the promise of riches by being granted shares in the company. “We were essentially getting shortchanged on salary,” the former employee said. “This tender is not a lottery ticket for us. This was back-pay.”
William Wong, a 32-year-old architect who joined WeWork in 2015, made some money in a 2017 tender offer at around $23 per share, but passed on the opportunity to sell in another offer at $54 a share in early 2019. The IPO promised riches, and repeat investments from institutional backers, including SoftBank and Benchmark, gave him confidence.
“Throughout the craziness and chaos of working at WeWork, it was encouraging that we had investors who … saw behind the curtain and still wanted to invest,” he says.
Days before the IPO was pulled, Wong resigned, triggering a 90-day clock to either exercise his right to buy shares or give up stock options he had received as part of his compensation. SoftBank’s offer to buy shares at $19.19 — far below the price it had paid in previous funding rounds — left most of his options underwater, meaning he would have to pay more to buy the shares than they were worth at the time. Still, in January, Wong scraped together around $15,000 to exercise those options still above water and claimed a small stake in the company.
“I didn’t go out and prematurely buy a boat and bank on that money being there,” he says. But the decision to buy shares “was seemingly low risk at the time.”
Many WeWork employees don’t buy SoftBank’s explanation that it chose to abandon the tender offer because WeWork hadn’t met conditions, including a planned roll-up of its China business and ongoing regulatory investigations. A SoftBank spokesperson said: “Any assertion to the contrary is false.”
Some suggest founder Masayoshi Son is betting that he can renegotiate at a lower price. Others see it as an elaborate deflection from SoftBank’s own financial troubles. In March, with SoftBank shares price down 50% over a few weeks, Son announced a $41 billion plan to buy back its stock and pay down debt.
WeWork executive chairman Marcelo Claure, who is also chief operating officer of SoftBank, has refused to comment on the board fight. The day the board lawsuit dropped, Claure tweeted: “SoftBank is fully committed to @WeWork’s success, and so am I.” He added: “We’re grateful for the employees, customers, and other stakeholders with us on this journey.”
But the platitudes about employees struck a bitter tone for those waiting for SoftBank to buy their shares. Says one former employee: “They can afford to pay.”