11 ms·
WeWork Co-Founder Has Cashed Out at Least $700M Via Sales, Loans
- snissn 7y agogood for him
- RIMR 7y agoI really hate this sentiment. The "if it makes you money it's good" mindset is the core of most corporate moral-rot. I don't care if what he did was legal, or if it benefitted him as a capitalist. It's unethical, and makes us all question the value of the WeWork ecosystem.
- Proven 7y agoWhy are you questioning it - IIRC the NYT wrote "feel good" articles about those visionaries several times ... > It's unethical You can't know whether it is or isn't. It's quite likely ethical - share with others the opportunity to make money off their WeWork investment. Maybe they'll instead lose money, but he didn't force them to buy it, so what exactly might be unethical about it?
- alt_f4 7y agoHe didn't say it is good for investors, shareholders, employees, whatever. he said it is good FOR HIM. And it is, the dude is set for life, even if this company goes down in flames. I doubt anyone (incl. you) in his shoes, given the option, would not do it.
- xxcode 7y agoIt's investor money
- ceejayoz 7y agoNot any more it isn't.
- deleted 7y ago[deleted]
- frostyj 7y agoI think WeWork is just a real estate company somehow.
- formercoder 7y agoThey are really just trying to price the risk spread of taking on long term debt (their leases) and re-lending with short term leases at a higher interest rate. I would guess this is super high beta (overall market exposure). When the next downturn comes we'll see if they have the capital to survive the credit event.
- xhgdvjky 7y agohonestly pretty sure they can buy whatever they want given their funding. whether that pays off for investors is another story
- deleted 7y ago[deleted]
- danieltillett 7y agoHas this model ever worked for long? I wonder how many of these business models are going to survive the next recession.
- formercoder 7y agoThere is no bad debt, just bad prices. Of course there may be no demand at the correct price. We’ll see how we work did
- Tehdasi 7y agoIt's actually the reverse of how a bank makes money, they take on sell long term debts and buy short term debts.
- danieltillett 7y ago
- e40 7y agoPaywall... alternate link?
- fuzz4lyfe 7y agoIt says he's investing the money in real estate and start ups, why not invest in his real estate start up?
- gorbachev 7y agoBecause his real estate start up isn't making a profit, so he can't personally profit from it.
- deleted 7y ago[deleted]
- mises 7y agoI take your point in principle (founders ought to be committed to their company), but I also see the other argument not to put all your eggs in one basket, so to speak. Of course, I certainly wouldn't put money into a company the founder of which does not believe it will succeed and profit.
- underwater 7y agoI can understand not wanting a founder to protect their nest egg and play it safe. But at 700M the founder, his children and his children's children can live a life of luxury and will never need to work again. That seems like it's a little beyond hedging the normal startup risks.
- cj 7y agoSame reason bitcoin millionaires should not buy more bitcoin. https://www.investopedia.com/investing/importance-diversification/ https://www.investopedia.com/investing/importance-diversific...
- charlesdm 7y agoBecause his paper net worth is more than $10bn, and it's safe to say you might want to take a bit off the table and diversify.
- tdumitrescu 7y agoAt least he plows it back into his industry... "Since 2013, Mr. Neumann has bought four homes in and around New York City and last year paid $21 million for a 13,000-square-foot house in the Bay Area with a guitar-shaped room."
- geodel 7y agoSeems he has solved housing problem at least for one person in bay area.
- deleted 7y ago[deleted]
- Ididntdothis 7y agoI always thought the “job creators” need all that money so they can invest in new industry that creates even more jobs. Not sure if buying houses helps with that.
- 52-6F-62 7y agoSounds like you may be onto something novel here... Sounds like the trickle was patched up.
- kediz 7y agoI heard he purchased a bunch of real estate and then lease them to WeWork and made a killing. Maybe he would later sell those real estates whose price have been inflated because of WeWork's presence. It is indeed a real estate company.
- elamje 7y agoI would like to see a source for this because I heard the same thing, but don’t want to spread disinformation. If it’s true, that’s not a good look for him or the company.
- ceejayoz 7y agohttps://www.wsj.com/articles/weworks-ceo-makes-millions-as-landlord-to-wework-11547640000 https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l... > One of the landlords behind the building was no ordinary owner: It was Adam Neumann, WeWork’s chief executive, who leased the property to WeWork after buying it, according to people familiar with the situation. > Mr. Neumann has made millions of dollars by leasing multiple properties in which he has an ownership stake back to WeWork, one of the country’s most valuable startups. Multiple investors of the privately held company said the arrangement concerned them as a potential conflict of interest in which the CEO could benefit on rents or other terms with the company.
- baby 7y agoSo he found a way to make money by buying a few places and renting it to his company. A lot of CEOs seem to find similar tricks. Does it mean that he is the landlord of all the locations of wework? No. Does it mean wework is a real estate company? Certainly not if they are only renting.
- fuzz4lyfe 7y agoIf they are only renting then they are a real estate company without any real estate.
- neilv 7y agoHow is WeWork valued at $47 billion? Is that a value based on business fundamentals, or on what various finance people will collectively play along with?
- xhgdvjky 7y agobasically SoftBank said so
- brianwawok 7y agoIs there a way to get out how much $ in property they own? 47 billion is a lot for an app startup, but if they owned say 40 billion in property, it's a lot less of a stretch...
- greenshackle2 7y agoI wasn't able to find hard numbers but every article I find says they have long term leases, they don't buy. EDIT: This article claims they own no property at all: https://www.ie.edu/exponential-learning/blog/finance/wework-really-worth-20-billion/ https://www.ie.edu/exponential-learning/blog/finance/wework-...
- rtkwe 7y agoThey don't own any of their property in fact a lot of it is owned by the CEO.
- nemothekid 7y agoHow is anything valued today? https://thereformedbroker.com/2019/06/13/when-everything-that-counts-cant-be-counted/?utm_source=dlvr.it&utm_medium=twitter https://thereformedbroker.com/2019/06/13/when-everything-tha...
- raiyu 7y agoWow thank you for sharing this, very interesting read and certainly paints an interesting perspective on the market cap value of WeWork. Though the growth stocks have traditionally been tech with high margins, or massive markets, it's interesting to see with an eventual IPO if WeWork will fit into this narrative, or if investors will see through that.
- blairanderson 7y agothats 5% of his equity if sold at the same valuation of the last funding ($47B). Its easy to point fingers at rich people, but this seems like a fairly logical cash-out. More stakeholders means more legitimacy.
- unreal37 7y agoHis net worth is listed at $4.1 Billion in Forbes, making this "cash out" about 25% of his net worth. Not 5%. The concern is that he's cashing out a large $ amount ($700 million) before the IPO, more than he needs to live, which may signify that he values the cash now over holding the stock. Which is not a good look considering the IPO is trying to get people to trade their cash for stock.
- luckydata 7y agoWhat number of red flags is going to be enough for the tech/business press to start asking questions about how WeWork is being run? From the outside it looks like another Theranos waiting to happen.
- Traster 7y agoIt doesn't look to me like a Theranos. Theranos lied, WeWork doesn't seem to be lying - they're completely open about their business model and financials. Its just people don't seem to be valuing it correctly.
- Invictus0 7y agoNot disagreeing, but don't forget about community adjusted ebitda.
- barce 7y agoYou rent a desk, and they get the money. I can assure you, the desks and the wifi included are real.
- baby 7y agoAre people spreading such FUD shorting Wework? They are selling a very real service and people seem to pay a lot of money for it. How is this not a good business?
- Deimorz 7y agoBeing a good business tends to involve making money. WeWork lost $1.9 billion in 2018, and expects to lose even more this year. https://www.axios.com/wework-doubled-revenue-loss-2018-eec75ff5-6466-4f20-9436-2f9a983db21b.html https://www.axios.com/wework-doubled-revenue-loss-2018-eec75...
- mmastrac 7y ago> He has also taken out loans of several hundred million dollars backed by his WeWork shares, people familiar with his finances said. That's not really "cashing out". The portion of your shares that you've sold, sure, but leveraging investments is just an option that's available once you hit a certain point and it just makes sense to take advantage of it.
- toomuchtodo 7y agoI would be interested in the terms of the loan in the event of a rapid depreciation of his WeWork stock (the collateral), or default. Borrowing against funny money (stock being valued by a non-independent entity, Softbank) isn't any more legit. EDIT: To the replies, your home and publicly traded stock can be valued and are semi-liquid. WeWork stock is not in the same class of asset.
- mmastrac 7y agoI'm pretty sure it'll be personally guaranteed. The bank takes a flyer that the stock will be worth something, but they are in first place to get paid back if things go south. It's no more "funny money" than me taking out a HELOC against my own house. WeWork clearly is worth >0% of its current mark-to-market, so as long as the bank picks a good ratio of loan-to-asset-value (10% of a 1B asset? Maybe), it's a decent risk for their loan capital.
- eigenvalue 7y agoIt's funny money in the sense that the value of your home hasn't increased by thousands of percent in the past couple of years. Also, a large portion of the real estate industry doesn't consider your house valuation to be one of the greatest boondoggles in real estate history.
- charlesdm 7y agoIt won't be personally guaranteed. Overcollateralized, sure. Maybe he can take out a $3-400m loan against $1bn worth of stock. Also mind that these loans were taken out before the company was valued at $47bn. Someone who built up that much wealth, even on paper? Every single bank will want to lend him money, at competitive rates. He's going to need / want debt for life to do future deals, even after his WeWork days. You want to be the preferred bank to that person. Banks would much rather lend out $100m than $1m 100x, as it takes a lot less effort. Hence they like these clients. I think you'd be surprised on the terms he got on those loans. The more money you need, the easier generally it is to do a deal.
- anigbrowl 7y agoHave fun suck- I mean, investors. I don't have much sympathy for them since they had the means to assess this before piling in.
- ngngngng 7y agoI know nothing about equity or cashing out, but a wework recruiter is trying very hard to get me to come write software at their new office in Utah. Would it be a good move financially? Could I make a bajillion dollars off it? The only competition is a company with Amazing paternity leave that would really suit my skill set and life style.
- dabeeeenster 7y agoI mean, probably no.
- privateSFacct 7y agoIf I could short wework I would. Softbank is basically setting its own valuations because of the amounts it has to invest. Wework has a ton of red flag. Softbank is a major wework investor. Could I short softbank?
- frenchman99 7y agoIsn't Softbank way to diversified to make any shorting strategy close to impossible ?
- eigenvalue 7y agoYes, Softbank has total balance sheet assets of approximately $335b, and their total investment in WeWork is ~$6b. But even that overstates it because a big portion of that investment was made via the Vision fund (i.e., other peoples' money).
- deleted 7y ago[deleted]
- opportune 7y agoYou theoretically could enter a short position on wework by creating a custom contract with a shareholder or option-holder
- vkou 7y agoWhatever Softbank burns on this investment may be lost in the noise of the rest of their business.
- harryh 7y agoI'll sell you WeWork shorts at a 40 billion valuation. We'll resolve the short 30 days after the IPO. How much would you like?
- bravura 7y agoCurious. Is this a legal trade?
- lanrh1836 7y agoI’ve been playing around with the idea of building on demand phone booth conference rooms (the ones you see in coworking spaces) but reservable in 15m blocks that open with a code from an app. Could partner with coffee shops or even cities for people who need some sound proof time while out and about to take a call, zoom into a meeting while out in public, etc.
- dmix 7y agoTwo person conference rooms with a fee would be in demand at any urban coffee shop, since tons of people meet and even do job interviews there. The big question is real estate because most coffeeshops are already maximizing their space so you’d be limited to the bigger ones.
- lanrh1836 7y agoYep, true. The single person booths would still be interesting for most remote workers though and don’t take up much space at all
- takanori 7y agoInterpreter booths! https://www.congressrentalusa.com/equipment_rentals_sales/interpretation_booths/index.html https://www.congressrentalusa.com/equipment_rentals_sales/in...
- janesvilleseo 7y agoWhat about the soundproof booths they have at airports? Those work wonders even though they are open
- deleted 7y ago[deleted]
- crikli 7y agoThis concept was on Shark Tank a while back: https://www.prnewswire.com/news-releases/phone-booth-entrepreneurs-to-appear-on-abcs-shark-tank-300839813.html https://www.prnewswire.com/news-releases/phone-booth-entrepr...