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That number is so misleading. I wish the media/prof Galloway would stop referencing it. The $700M number is a mix of a $300M secondary sale to SoftBank and a $

That number is so misleading. I wish the media/prof Galloway would stop referencing it. The $700M number is a mix of a $300M secondary sale to SoftBank and a $400M loan to purchase stock options. We don't know enough to say how far ahead (or behind) he is. He likely exercised his stock options at a highly inflated value, which means his AMT bill must be huge. Not only that, he is sitting on stock that is rapidly diminishing in value, and there's a non-zero chance it could be worth 0. So he has maybe $150M cash after the $300M sale + ??? value of stock from exercising $400M in options. And his liability is his capital gains bill from the $300M sale + the $400M loan to pay back + AMT bill from the exercise of stock options.

MuffinFlavored 7y ago
> he has maybe $150M cash $150m is enough to be fine too :)
- unaxk38 7y ago
  His worth is assets - liabilities. I'm saying his liabilities look huge, much more than $150M.
paulsutter 7y ago
He surely owns his stock outright, not as options, since he founded the company.
- unaxk38 7y ago
  No, that isn't how options work. Everyone needs to pay...it's just usually when you found a company you're buying options for fractions of a penny. See https://www.axios.com/behind-wework-founders-700m-cash-out-37b82639-272a-4846-9a43-7deb567b04a4.html https://www.axios.com/behind-wework-founders-700m-cash-out-3... for more info on the $400M loan - it's not clear if it's to purchase his stock options or to pay for AMT...it's likely additional options he was granted through the years at a higher strike price.
  - sieabahlpark 7y ago
    When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)
    - unaxk38 7y ago
      See the axios article. The $400M was a loan to exercise stock options. You can acquire more options after founding a company as part of a bonus or additional comp...
      - paulsutter 7y ago
        Per the article, “part” of the loan was to exercise stock options, but seriously as founder most of his stock he would already own outright > Neumann used some of the $400 million in loans to exercise stock options in WeWork, per the source.
    - the_watcher 7y ago
      That's not usually how it works (WeWork doesn't follow the usual pattern, so they might not have done this). Generally, companies that plan to raise money incorporate, and founders are given options at the strike price at time of founding (generally so small to be effectively free), which vest over time. You also create an option pool that's already reserved for hiring. Founders don't generally hire someone and give away equity they already control, it's almost always from a pool specifically reserved for this. There are startup school lectures on how this works in practice at YC if you want to learn more.
      - malandrew 7y ago
        The face amount on the stock is usually so small that you immediately exercise them for a few hundred or few thousand dollars and file an 83(b)
    - pat87 7y ago
      Founders need to purchase shares in the company they found. The shares are extremely cheap as the company has no assets, but you still need to physically wire money to the company bank account. Source: https://stripe.com/docs/atlas/issuing-stock https://stripe.com/docs/atlas/issuing-stock

MuffinFlavored 7y ago

> he has maybe $150M cash $150m is enough to be fine too :)

unaxk38 7y ago
His worth is assets - liabilities. I'm saying his liabilities look huge, much more than $150M.

paulsutter 7y ago

He surely owns his stock outright, not as options, since he founded the company.

unaxk38 7y ago
No, that isn't how options work. Everyone needs to pay...it's just usually when you found a company you're buying options for fractions of a penny. See https://www.axios.com/behind-wework-founders-700m-cash-out-37b82639-272a-4846-9a43-7deb567b04a4.html https://www.axios.com/behind-wework-founders-700m-cash-out-3... for more info on the $400M loan - it's not clear if it's to purchase his stock options or to pay for AMT...it's likely additional options he was granted through the years at a higher strike price.
- sieabahlpark 7y ago
  When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)
  - unaxk38 7y ago
    See the axios article. The $400M was a loan to exercise stock options. You can acquire more options after founding a company as part of a bonus or additional comp...
    - paulsutter 7y ago
      Per the article, “part” of the loan was to exercise stock options, but seriously as founder most of his stock he would already own outright > Neumann used some of the $400 million in loans to exercise stock options in WeWork, per the source.
  - the_watcher 7y ago
    That's not usually how it works (WeWork doesn't follow the usual pattern, so they might not have done this). Generally, companies that plan to raise money incorporate, and founders are given options at the strike price at time of founding (generally so small to be effectively free), which vest over time. You also create an option pool that's already reserved for hiring. Founders don't generally hire someone and give away equity they already control, it's almost always from a pool specifically reserved for this. There are startup school lectures on how this works in practice at YC if you want to learn more.
    - malandrew 7y ago
      The face amount on the stock is usually so small that you immediately exercise them for a few hundred or few thousand dollars and file an 83(b)
  - pat87 7y ago
    Founders need to purchase shares in the company they found. The shares are extremely cheap as the company has no assets, but you still need to physically wire money to the company bank account. Source: https://stripe.com/docs/atlas/issuing-stock https://stripe.com/docs/atlas/issuing-stock