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I 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 bee

• elamje 7y ago
  I 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 ago
    https://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 ago
      So 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 ago
        If they are only renting then they are a real estate company without any real estate.
        • mjcl 7y ago
          That’s called a property management company.
      • elamje 7y ago
        I would be interested to see if Jamie Dimon or Jeff Bezos could slip by owning a JP Morgan office building or Amazon warehouse, respectively. You pass it off like it is the norm. If it is normal, please cite several examples that come to mind. The examples cannot include private companies where the CEO is the 100% owner.
• diafygi 7y ago
  Isn't this exactly how McDonald's did it?
  • Topgamer7 7y ago
    Yes I've heard this too. The franchise agreement states that you are behest to wherever McDonald's decides to let you lease. Unable to corroborate though.
  • kgwgk 7y ago
    How does the analogy "WeWork Founder" ~ "McDonald's Corporation" work precisely?
    • reallydude 7y ago
      Ray Kroc is analogous to Adam Neumann. They both expanded a marginally profitable (and hard to grow) business by expanding a few locations than leveraging the capital to buy real-estate, which allowed them to stop caring about the original and individual franchised business success. Using the massive income of being commercial property landlords, even if the franchises failed, they had revenue growth. Now that Kroc is gone, the reference to McDonald's as a corporation is convenient, since the history is understood and available. The movie "The Founder" might clear things up.
      • kgwgk 7y ago
        Did Kroc leased his own real estate to the company he managed? I don’t think so, but I could be wrong.
        • lkschubert8 7y ago
          From what I understand he purchased real estate and then leased it to the franchisees.
        • reallydude 7y ago
          https://money.howstuffworks.com/mcdonalds2.htm https://money.howstuffworks.com/mcdonalds2.htm Just googling the history, so you can understand what happened, is a minimum when having a discussion about history. Whoever went so far as to wasting a point downmodding me, didn't even do that.
• robocat 7y ago
  "WeWork is a weird company because it is a real estate company that thinks it’s a tech startup; it seems to have the culture and New-Age-y patter and grandiose ambition and valuation of a tech company. But what if, deep down in its heart, it really is a real estate company?" "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." Mr. Neumann "is WeWork’s largest individual shareholder and has voting control over the company, so it is not clear that the board can say no." https://www.bloomberg.com/amp/opinion/articles/2019-01-16/wework-ceo-adam-neumann-is-also-a-landlord https://www.bloomberg.com/amp/opinion/articles/2019-01-16/we...
  • barce 7y ago
    I totally respect what they've done to build such a large company. But tbh, they've never built any tech. My guess is they had such a hard time building the systems they needed that they acquired Meetup.com to address those needs. So deep down, tech-wise, it's really just Meetup.
    • toasterlovin 7y ago
      And Meetup is a shit show, technically. Most of their features don’t work or haven’t been updated in years. Their iOS app require a superstitious pigeon dance to make the notification badge on the app icon go away. Etc, etc.
  • Nerada 7y ago
    Levine does some really great working breaking down a lot of these current events.
  • dmix 7y ago
    It’s rare to find a founder being the one who is fleecing the investors instead of the other way around.
    • phamilton 7y ago
      Not that rare. Ignoring cases like fraud (old ones - Enron, WorldCom and new cases like Theranos) there's still plenty of things like https://news.ycombinator.com/item?id=17239361 https://news.ycombinator.com/item?id=17239361
• gibybo 7y ago
  Do the investors in WeWork just allow him to do this? Did he hide it from them? This seems like an obvious self-dealing situation any experienced investor would be watching out for.
  • ergothus 7y ago
    Do investors care? If WeWork succeeds, he can cut into the profits, but it also means he's invested in the company succeeding.
    • evrydayhustling 7y ago
      It means precisely that he is not invested in the company succeeding - he makes money either way and can make more by overcharging the company.
• debt 7y ago
  "I heard he purchased a bunch of real estate and then lease them to WeWork and made a killing." Clearly an ethical guy we're dealing with here. I'm sure this will all pan out well down the road.
  • sprafa 7y ago
    Heheh coughUber*cough Seriously where’s the vetting VCs are supposed to be doing? Used to be you had to hustle AND have a good idea to have a VC ready company. Now it seems like all you need to do is hustle and be in the tight geographical location (Sillicon Valley) and you will get money for stupid things like this damned Coworking company with free beers.
  • dnh44 7y ago
    At least in the UK, this would not be considered unethical I don’t think. It’s standard practice to buy a building personally and rent it back to your own company. It’s what accountants recommend you do.
    • toasterlovin 7y ago
      That’s fine if you’re the sole owner of your company, but not so much when there are other owners who have collectively invested billions.
    • youngtaff 7y ago
      That's generally for relatively small businesses, particularly family owned ones - often the premises are owned by the company pension scheme, which is both tax efficient and allows the wealth to be passed onto future generations It's also not unusual for some larger companies to have their head office owned by the founder / majority shareholder in a separate company, Monsoon and Arcadia in the UK are two examples of this
• usbseeker 7y ago
  Is he leasing them the properties at fair market rates? If so he might be preventing gouging by not forcing we work to bid against the rest of the market.
  • Traster 7y ago
    If it were strategically important for the company the company should have bought the properties. It's a direct conflict of interest - and one that has been serious enough that they've ended up having to build an entire corporate strategy to deal with. Also, this is not the only conflict of interest: WeWork bought part of an artificial surfing wave pool in 2016 and the only reason anyone can find to do that is the CEO likes surfing.
    • sprafa 7y ago
      If this is true then I’m increasingly surprised at how bad VC returns must be for them to think this is a good investment.
      • maxerickson 7y ago
        It's perhaps the other way around. VC returns are so good that they can make lots of mistakes.
        • rficcaglia 7y ago
          No it’s not: “achieved an overall return of 11.1% for the year.” https://globenewswire.com/news-release/2018/10/15/1621269/0/en/US-Venture-Capital-Achieved-Respectable-Double-Digit-Return-in-2017.html https://globenewswire.com/news-release/2018/10/15/1621269/0/... See also: https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...
• Waterluvian 7y ago
  I might sound super ignorant. But isn't this standard business style for the former soviet nations? It seems unsurprising to me to see a complete capitalization of the opportunity in every legal or legally gray way. Ie. The long game is super risky. Take everything that isn't bolted down while you still can. Maybe these things are exactly what happen everywhere and I'm just applying a perception of corruption-as-usual.
  • consumer451 7y ago
    I agree with your assessment. This may be have always been the norm in the USA as well, my naivete maybe be showing here, but this absolutely feels like self-dealing[0]. This seems unethical at the very least. This is the kind of thing that we made nihilistic jokes about in my former home, a Soviet satellite nation. [0] https://en.wikipedia.org/wiki/Self-dealing https://en.wikipedia.org/wiki/Self-dealing
  • H8crilA 7y ago
    Yeah, the big question is why would Masayoshi Son bankroll a super overpriced REIT-like company. That dude is not your random retail investor that couldn't see it for what it is.
    • MegaButts 7y ago
      In my opinion, SoftBank is a below average VC firm (I used to work for one of their companies and was actually a fly on the wall for some of the strategic fundraising conversations). They just have way more money than everyone else, which is important. But I'm pretty sure they're going to lose money in aggregate. Don't forget this guy famously lost more money than anyone in history. https://arstechnica.com/information-technology/2012/10/how-sprints-new-boss-lost-70-billion-of-his-own-cash-and-still-stayed-rich/ https://arstechnica.com/information-technology/2012/10/how-s...
      • KaoruAoiShiho 7y ago
        Can you talk about in general terms what you heard that makes you think SoftBank isn't that good at what they do?
• jariel 7y ago
  "I heard he purchased a bunch of real estate and then lease them to WeWork and made a killing." This might very well be illegal because he would be defrauding investors, the SEC should have something to say about that.
• YayamiOmate 7y ago
  It reminds me of the movie about McDondals start. Not the same mechanism but similiar modus operandi. It seemed even more ingenious/mischeviois, because in exchange for franchise deal they leased land to franchisers, not even the parent company. So they didn't milk their company. Im not sure if thats the whole of mcd corporation income structure, but the movie hinged on this one. Hope I didnt spoil too much, there's more to the picture anyways.
• Tiktaalik 7y ago
  The CEO of Hootsuite did this too.
  • nickfromseattle 7y ago
    Can you please clarify / expand? The CEO of Hootsuite did what? How?
    • Tiktaalik 7y ago
      Hootsuite's CEO bought a block of land where Hootsuite was in partnership with a real estate developer, then got it beneficially upzoned for 'tech' and is now building a tech campus on it. https://www.theglobeandmail.com/news/british-columbia/vancouver-considers-beneficial-zoning-changes-to-hootsuites-land/article27594862/ https://www.theglobeandmail.com/news/british-columbia/vancou...