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This kind of conflict indeed looks sketchy, and I don't think Neumann should do it, but the risk and opportunity still run both ways. Neumann is assuming the c
by evanweaver 8y ago
This kind of conflict indeed looks sketchy, and I don't think Neumann should do it, but the risk and opportunity still run both ways.
Neumann is assuming the capital risk. Does WeWork and its investors (including Neumann!) want these assets and associated liabilities on its books? Probably not. Is Neumann making money from this transaction long term? No way to tell; he himself probably doesn't even know if these deals are profitable for him now.
What he is definitely doing is increasing his levered bet on WeWork, which could be good or bad for WeWork, and good or bad for him, depending on how everything turns out.
- mabbo 8y agoNeumann is the one making the deals for rentals- including the price. As the representative of the company he is incentivized to reduce the rental price as much as possible. But as the owner on the other side of the same deal, he's incentivized to increase the price as much as possible. The problem with this is that as CEO, he's talking about someone else's money (investors) while the other side he's talking about money in his pocket. How can there not be a conflict of interest?
- evanweaver 8y agoI didn't deny there was a conflict. I'm just saying it's not a conflict that automatically benefits him at the expense of the company.
- uberdru 8y agoHow can you be sure he's assuming any capital risk? It's far more likely that any downside would be passed on to shareholders.