
WeWork's Adam Neumann offered package worth up to $1.7B to step down from board - adventured
https://www.cnbc.com/2019/10/22/weworks-adam-neumann-to-get-200-million-to-leave-board-report-says.html
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Lazare
Mmm, it's interesting. There's really two options here:

Option A: Son is right, and the market is wrong. WeWork is a ~$50b company,
and after a bit of hardball SoftBank will own 70% of it for a very affordable
$15b (or whatever it is). And once the market catches on, WeWork's valuation
will quintuple overnight, netting the Vision Fund a nice profit and Son the
right to be very, very smug.

Option B: The market is right, and Son is wrong. WeWork is a ~$10b company,
which through a fit of almost comic mismanagement Son has managed to pay ~$15b
for (and still owns only a bare majority). With a lot of work (and thanks to
getting rid of Neumann), it might one day be worth enough SoftBank/the Vision
fund is (barely) not below water, but even that's iffy.

I'm no expert, and while on paper option B does look pretty compelling, let's
say maybe option A is right after all. In which case...

...given that Son is just a uniquely talented visionary, and saw potential
that nobody else (and especially not other potential investors) saw, uh...why
in the hell did he keep investing at higher and higher valuations? Like, if
the market is just dumb and can't see that WeWork is worth $50b, not $10b,
then.... _why invest at a $50b valuation_? Unless it was just a glorified
pump-and-dump all along (ie, Son never thought it was worth $50b, but he
thought other people could be fooled into thinking it), in which case, why
invest _now_? Does he think he's going to get a second bite at the apple? It's
really hard to imagine us all being here in 18-36 months going "wow, WeWork
sure has turned things around, I think their IPO will price at $60b!" Right?
Isn't the WeWork hype irrevocably gone?

This whole thing is so odd. Is it really as simple as "we're just piling
billions of dollars up and setting them on fire because we love expensive
bonfires"? Is that it?

~~~
empath75
> given that Son is just a uniquely talented visionary

He's lost more money than anyone in history. And probably is about to do it a
second time.

~~~
et2o
?

~~~
adventured
That's based on Son having a paper net worth of ~$85-$90 billion at the peak
of the dotcom bubble and seeing all but about $3 billion of it vanish, peak to
trough. You can move the numbers a bit (eg debate over the peak figure),
however it still comes out in a similar way... he plausibly lost the most
wealth - on paper - of any person that has ever lived.

Yasumitsu Shigeta, another Japanese dotcom super billionaire, lost around $41
billion on paper during the crash. He recovered somewhat and remains a
billionaire.

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tqkxzugoaupvwqr
What an amazing twist if true. In my opinion, Neumann is a conman. That he got
away with taking out $700 million pre-IPO, that We is close to bankcruptcy
just weeks later, that he now gets an additional $1.7 billion … it’s just
jawdropping. I don’t understand why he is not afraid for his safety.

~~~
paws
Why do VCs let founders cash out pre-IPO?

AFAIK fiduciary self dealing is illegal in public companies but for whatever
reason WeWork's investors evidently didn't seem to care. Why?

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lonelappde
The founders have control of the company and hold it for ransom. They can
destroy the company if they aren't kept happy.

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paws
Right, that's the part I'm a bit confused by.

If I'm understanding you right, it sounds like VCs choose to not require
fiduciary-style obligations of the founders?

e.g. whatever the contract looks like, I'm a bit surprised it wouldn't have a
term along the lines of 'by taking this money you promise not to self deal'

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hn_throwaway_99
Yet one more example that leads the average person to feel "The system is
rigged, and grossly at that." I don't even think your average person minds
that much when there are insanely wealthy people who built huge, successful
companies, but here is another case of someone who has destroyed billions in
wealth, and is paid yet more billions for the honor. It's this "heads I win,
tails you lose" system that eventually brings people to want to tear the whole
thing down.

~~~
campfireveteran
The vulture-cannibalistic corporate capture of nearly everything leads to many
vicious feedback loops including extinctions of species, destruction of the
planet, grotesque income&property ownership inequality and deepening political
capture (corruption). If the average person from the masses of people had any
self-respect, they'd band together and form worker-owned co-ops to ensure
livable wages AND fair remuneration from their work. They'll never get
anything more than crumbs with this current, extremely unfair wealth transfer
(e.g., slavery) arrangement.

~~~
goldenkey
But thats the crux - pressure and incentives. Capital is supposed to reward
ingenuity and efficiency. Instead it is mainly used like you say, in a
recursive way, so to protect itself even when there is no invention, no
ingenuity, just pure oppression through disruption of communication, things
like unions, independent candidates, etc

Crumbs from an abundance are pleasing to those who have comparisons to look
at: nature's parasites or pangs of age or pangs of poverty or 1800s medicine.

The real issue was never equality. It has always been adequacy and comparative
"neo-nostalgism."

Until the hinge breaks of fully, there are usually never any real revolutions.
Maybe the internet can change that.

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matthewsills
Anyone from inside WeWork able to give a sense of the impact on morale? Are
people more worried about the coming layoffs, relieved that they won't extend
to the entire company, or just pissed enough at Neumann to hope the whole
thing implodes?

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KoftaBob
A Japanese VC fund that funneled billions of Saudi Sovereign Fund money into
American real estate owners pockets. The circle of life.

~~~
eternalban
And somewhere in the center of that circle is the actual untold story.

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nextstep
This is an outrage when the employees are likely to get nothing for their
options of common stock: [https://www.businessinsider.com/wework-employee-
equity-ipo-b...](https://www.businessinsider.com/wework-employee-equity-ipo-
bankruptcy-lesson-for-tech-startups-2019-10)

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fasicle
"$185 million consulting fee"

Now that's a steep consulting rate, wonder what he bills per hour

~~~
louisswiss
Presumably about $370 million.

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paulsutter
Given that WeWork has already raised $13B, and the new premoney is $8B, why
isn’t Adam wiped out by the preferences on the old investment?

Was Softbank buying common shares in some prior rounds?

~~~
marcinzm
As I understand it, Adam's shares have much higher voting rights. They may or
may not be worth anything but they control the company.

~~~
hkmurakami
They have 10-1 voting rights. There were talks of this being reduced to 3-1
during the IPO talks, but those broke down when the IPO was pulled.

~~~
throwawaysea
Do you mean he would voluntarily agree to reduce his voting rights? Or was
there some means to force him into that?

~~~
paulsutter
It’s an interesting standoff because his only negotiating stance would be to
refuse to accept the investment and key the company go bankrupt.

I guess avoiding that is worth $1.7B. Softbank would control the company after
bankruptcy anyway, but the process would be messy

~~~
hkmurakami
Presumably they may have opted for a very ominous debt package, which would
have been senior to Softbank's equity, which is another thing SB would have
liked to avoid.

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setgree
A friend once commented about Skull and Bones [0]: "I don't know what's worse,
the fact that it exists, or that I'm not a part of it." (Neither of us went to
Yale :))

I wish there were a single word to capture this mix, because it's perfect for
this story. This is absolutely repulsive, and also, why can't it happen to
me?!

[0]
[https://en.wikipedia.org/wiki/Skull_and_Bones](https://en.wikipedia.org/wiki/Skull_and_Bones)

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DebtDeflation
It's getting harder and harder to see how there's ever going to be a liquidity
event here. The steps being taken to become profitable, while necessary, are
going to come at the expense of future growth. Without the hypergrowth fake
tech unicorn story, they get valued like Regus. Neither SoftBank nor Neumann
are incented to do an IPO with a Regus-like valuation. I doubt there are
buyers for a private sale. How does this end?

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buboard
One of the best wealth redistribution agents in the world. He ll probably be
very sought after , if he ever wants to work again.

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40acres
I won't be surprised if WeWork comes out of this mess relatively strong. A
crisis is a terrible thing to waste and I still believe that the idea of
WeWork can be valuable.

A lot of ink has been spilled about how cooky Adam and his wife are but I
really liked the WeGrow idea of providing schooling / daycare. Ask any parent
of young kids how much they and spend on childcare and you'll be shocked.
Combining the work space with childcare (providing everything is on the up and
up) is an incredible bundling of convenience. Even some of WeWorks well
criticised acquisitions seemed like great ideas to me. Leveraging Meetup.com
with WeWork locations just seems natural.

It all hinges on Softbanks ability to eat shit for a few years while
rebuilding the company but I do think that there is a still a very strong
brand here that had some great ideas but got a bit too hooked on the Kool aid.

~~~
navigatesol
> _A lot of ink has been spilled about how cooky Adam and his wife are but I
> really liked the WeGrow idea of providing schooling / daycare._

Yeah, and everyone likes the idea of self-driving, solar-powered Tesla robo-
taxis, too. Finding things that people want is easy; providing that product or
service at a profit is much harder.

At the end of the day, WeWork is a real-estate company. 25% of the world's
wealth is tied up in this industry. It's old, and efficient. Borrowing long,
lending short is a surefire way to get crushed in a recession. This is known.

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dumbfounder
If the majority of that is in loans against the stock he will be in trouble if
(when) the stock doesn't realize the liquidity and price he needs to pay off
those loans, right?

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nytesky
Its too bad he truly wasn't as principled as the image he tried to cultivate.

He could bestow each employee of his company $80k, as a bonus for all the pain
his mismanagement has caused.

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nathanaldensr
Headline: "WeWork's Adam Neumann will reportedly get a $1.7 billion deal to
step down from board."

First paragraph: "Former WeWork CEO Adam Neumann will get about $1.7 million
in stock, cash and credit to walk away from the company and give up his voting
rights."

Which is it: billion or million?

~~~
mfer
> SoftBank will pay Neumann $1 billion for his shares, a $185 million
> consulting fee and will offer him $500 million in credit to help repay his
> loans to JPMorgan, according to the report.

This is from the article and provides the breakdown. It does look like there
are discrepancies in the article, though. Guess this is what happens when you
rush to publish or don't have good editing.

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xoz275
Stories like this make me feel stupid for caring about honesty in
business/life.

:(

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holstvoogd
And meanwhile they are not firing ppl because they can't afford their
severance packages.

How is this not criminal?

~~~
ProAm
Severance isnt required by law?

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campfireveteran
Very golden parachute for such sloppy execution.

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perseusprime11
It pays to be a liability...

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arbuge
This is not going to work.

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sudoaza
IPO are the new ICO

