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Thinking out loud here, it seems like this behaves very similarly to leverage in that it kind of magnifies his gains or losses from wework. If Wework succeeds h
by habitue 8y ago
Thinking out loud here, it seems like this behaves very similarly to leverage in that it kind of magnifies his gains or losses from wework. If Wework succeeds he can squeeze the company for more rent. If Wework fails, suddenly he also has a bunch of broken leases. (Although he has a floor to his losses from the real estate since he can eventually rerent it, maybe at a lower price)
Another interesting aspect of this is that he can basically insider trade with impunity since real estate isn't a security. Who knows when/where WeWork will open an office next? Well, he does, and can buy a place cheaply (I don't imagine WeWork presence affects the real estate price much, but in principle it could).
- thesausageking 8y agoHe wins either way. He sold some of his WeWork stock, bought buildings with the proceeds, and then had WeWork sign leases with them. If WeWork folds, he still owns the buildings and can sign new tenants. Before it does, the faster it expands, the more often he can do this, and the more money he can make. That's the conflict of interest. WeWork shareholders want WeWork to build a great business and eventually IPO, but it maybe better for him personally if WeWork simply grows as fast as possible at any cost by doing things like signing expensive leases it can't make the unit economics work for.
- achillesheels 8y agoVery elegantly worded, thank you.