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Does the S-1 disclose the fact that the founder is also one of the company’s biggest business partners? He buys up properties and then leases them to WeWork. S

Does the S-1 disclose the fact that the founder is also one of the company’s biggest business partners? He buys up properties and then leases them to WeWork. Seems like a red flag to me.

sjtgraham 7y ago
Why don't you read it and find out?
- i_am_nomad 7y ago
  Because I just got fifty other smarter and better educated people to do it for me.
dillonmckay 7y ago
The majority of businesses I have worked for, the company leases the building from another company owned by the founders.
- rahkiin 7y ago
  This is to protect the buildings from liability through issues with workers. You don't want to be sued by a worker for something and have the buildings on the table.
  - ckdarby 7y ago
    Would note it financially secures the founders as well. Even if the company removes the founders they're going to be getting that lease payment forever.
  - lotsofpulp 7y ago
    It’s also due to being able to take advantage of lower taxes on capital gains, which you can have if you structure the real estate part of the business to have income from “passive activity” versus “business activity”. https://www.irs.gov/businesses/small-businesses-self-employed/passive-activity-losses-real-estate-tax-tips https://www.irs.gov/businesses/small-businesses-self-employe...
    - deleted 7y ago
      [deleted]
- buboard 7y ago
  doesnt that sound like laundering?
  - Cthulhu_ 7y ago
    Not really, it sounds like a rainy day fund - a business may be out of business (or out of the building) within ten years, but the building will be around for at least another fifty, retain its value, and provide constant income. The laundering aspect may have a grain of truth in a way though; instead of having e.g. an investment or sale paid out (and consequently taxed), it's rerouted into buying a building. Why pay I dunno, 50% income tax to get the money right now instead of reinvesting the money and long-term earning a lot more?
    - empath75 7y ago
      For the CEO
dynjo 7y ago
Then cashes out another $700m of investors cash pre-IPO probably to buy more properties, to lease back again...genius. But yeah, red flag a mile wide.
- pge 7y ago
  I agree with your larger point that his dealings are a huge red flag, but just to clarify, a bunch of that money was borrowing against his existing stock rather than actually selling to investors, which is quite different. Selling can imply a lack of confidence in future value, while borrowing against the stock implies some level of confidence.
  - wpietri 7y ago
    When I was in financial trading, I think that's what we called a "Texas hedge". (A hedge being where you take some of your money and buy protection against downside risk. For example, since I'm in tech, it's in my interest to sell some of my company stock and buy something that is uncorrelated with tech. That way if my company blows up, I won't be totally broke. The Texas hedge is doing the opposite, so that you're even more screwed if the bet doesn't go your way.) This could indicate confidence, but it could also indicate a double-or-nothing mentality. You can only be so bankrupt, after all.
jsty 7y ago
Yes, under "related party transactions": https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm#toc781982_105 https://www.sec.gov/Archives/edgar/data/1533523/000119312519... "We are party to lease agreements for four commercial properties with landlord entities in which Adam has an ownership interest..."
- utopian3 7y ago
  Isn’t “related party transactions” where Enron’s CFO hid most of their funny accounting to companies he controlled and profited from?
  - tgtweak 7y ago
    Seems like a good place to put it then. S1 readers know to look here.
- human20190310 7y ago
  > Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator... Is this a normal sort of thing to see in such a filing? He's being referred to by his first name and heaped with praise.
  - burtonator 7y ago
    Adam is extraordinarily humble. Everyone, including Adam, would never exaggerate. Adam is a part of everything. He is in the sky and sea. He is in the dreams of children at night. He is all that there is, forever.
    - buckminster 7y ago
      He is We.
    - smacktoward 7y ago
      Adam is the Alpha and the Omega, the Beginning and the End. Those who invest will inherit all this, and Adam will be their God and they will be his children. But the cowardly, the unbelieving, the shorts -- they will be consigned to the fiery lake of burning sulphur. This is the second death.
citilife 7y ago
This is pretty much how McDonalds controls its franchisees and in fact makes money. While I agree in this case "The We Company" should actually be holding the buildings (as it's a workspace holding company), it's a good way to ensure limited liability to the company and allow the founder to exert control (not saying it's a good thing for share holders).
anonu 7y ago
This is a massive conflict of interest. It's been well publicized. But it seems wall Street doesn't care.
jakear 7y ago
The JOBS act seems to get them out of some of that disclosure. On page 126: The JOBS act entitles them to "reduced disclosure about executive compensation arrangements and no requirement to include a compensation discussion and analysis"

Does the S-1 disclose the fact that the founder is also one of the company’s biggest business partners? He buys up properties and then leases them to WeWork. Seems like a red flag to me.

sjtgraham 7y ago

Why don't you read it and find out?

i_am_nomad 7y ago
Because I just got fifty other smarter and better educated people to do it for me.

dillonmckay 7y ago

The majority of businesses I have worked for, the company leases the building from another company owned by the founders.

rahkiin 7y ago
This is to protect the buildings from liability through issues with workers. You don't want to be sued by a worker for something and have the buildings on the table.
- ckdarby 7y ago
  Would note it financially secures the founders as well. Even if the company removes the founders they're going to be getting that lease payment forever.
- lotsofpulp 7y ago
  It’s also due to being able to take advantage of lower taxes on capital gains, which you can have if you structure the real estate part of the business to have income from “passive activity” versus “business activity”. https://www.irs.gov/businesses/small-businesses-self-employed/passive-activity-losses-real-estate-tax-tips https://www.irs.gov/businesses/small-businesses-self-employe...
  - deleted 7y ago
    [deleted]
buboard 7y ago
doesnt that sound like laundering?
- Cthulhu_ 7y ago
  Not really, it sounds like a rainy day fund - a business may be out of business (or out of the building) within ten years, but the building will be around for at least another fifty, retain its value, and provide constant income. The laundering aspect may have a grain of truth in a way though; instead of having e.g. an investment or sale paid out (and consequently taxed), it's rerouted into buying a building. Why pay I dunno, 50% income tax to get the money right now instead of reinvesting the money and long-term earning a lot more?
  - empath75 7y ago
    For the CEO

dynjo 7y ago

Then cashes out another $700m of investors cash pre-IPO probably to buy more properties, to lease back again...genius. But yeah, red flag a mile wide.

pge 7y ago
I agree with your larger point that his dealings are a huge red flag, but just to clarify, a bunch of that money was borrowing against his existing stock rather than actually selling to investors, which is quite different. Selling can imply a lack of confidence in future value, while borrowing against the stock implies some level of confidence.
- wpietri 7y ago
  When I was in financial trading, I think that's what we called a "Texas hedge". (A hedge being where you take some of your money and buy protection against downside risk. For example, since I'm in tech, it's in my interest to sell some of my company stock and buy something that is uncorrelated with tech. That way if my company blows up, I won't be totally broke. The Texas hedge is doing the opposite, so that you're even more screwed if the bet doesn't go your way.) This could indicate confidence, but it could also indicate a double-or-nothing mentality. You can only be so bankrupt, after all.

jsty 7y ago

Yes, under "related party transactions": https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm#toc781982_105 https://www.sec.gov/Archives/edgar/data/1533523/000119312519... "We are party to lease agreements for four commercial properties with landlord entities in which Adam has an ownership interest..."

utopian3 7y ago
Isn’t “related party transactions” where Enron’s CFO hid most of their funny accounting to companies he controlled and profited from?
- tgtweak 7y ago
  Seems like a good place to put it then. S1 readers know to look here.
human20190310 7y ago
> Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator... Is this a normal sort of thing to see in such a filing? He's being referred to by his first name and heaped with praise.
- burtonator 7y ago
  Adam is extraordinarily humble. Everyone, including Adam, would never exaggerate. Adam is a part of everything. He is in the sky and sea. He is in the dreams of children at night. He is all that there is, forever.
  - buckminster 7y ago
    He is We.
  - smacktoward 7y ago
    Adam is the Alpha and the Omega, the Beginning and the End. Those who invest will inherit all this, and Adam will be their God and they will be his children. But the cowardly, the unbelieving, the shorts -- they will be consigned to the fiery lake of burning sulphur. This is the second death.

citilife 7y ago

This is pretty much how McDonalds controls its franchisees and in fact makes money. While I agree in this case "The We Company" should actually be holding the buildings (as it's a workspace holding company), it's a good way to ensure limited liability to the company and allow the founder to exert control (not saying it's a good thing for share holders).

anonu 7y ago

This is a massive conflict of interest. It's been well publicized. But it seems wall Street doesn't care.

jakear 7y ago

The JOBS act seems to get them out of some of that disclosure. On page 126: The JOBS act entitles them to "reduced disclosure about executive compensation arrangements and no requirement to include a compensation discussion and analysis"