
WeWork Needed a Bailout, But Adam Neumann Still Leaves a Billionaire - uptown
https://www.bloomberg.com/news/articles/2019-10-22/neumann-clings-to-billionaire-status-after-wework-gets-a-bailout
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WisNorCan
There is another less discussed downside to Vision Fund’s reckless spending
and overvaluation of startups.

While Travis & Adam make their billions, the employees at Uber and WeWork are
granted overvalued options and stock that subsequently crashes.

The Uber stock is still below where it was 5 years ago and may never recover.
The WeWork stock will likely never recover.

As an employee, I would avoid working for a company that is taking funny money
from VF. Its a big warning sign to see a company raise from VF given what has
come to light.

~~~
indemnity
Every time I see these shenanigans it validates my position of turning options
into cash if I’m above water ASAP, and getting as much of my raises into base
salary as possible.

Twice burned (2001, 2009)...

~~~
robk
Meh I regret selling any GOOG in the low $200s

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solveit
It was still the right move. As every poker player knows, just because you
lost doesn't mean you played the hand wrong.

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askafriend
It wasn't necessarily the right move. He/she likely had asymmetric information
about where Google was going and how likely it was to continue succeeding.

If they couldn't sufficiently exploit that, then that's on them (assuming they
had access to all the relevant metrics).

It's great to diversify, but blindly selling isn't some sort of virtue to
optimize for...

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compsciphd
depend, as I wrote above. If I give you 2 options.

1) $300K in GOOG 2) $300K in cash

if you dont believe that using all of the $300K in cash to buy GOOG
immediately is the smart move, yes, you should be blindly diversifying.

~~~
askafriend
I think we're largely in agreement.

If you can't leverage the asymmetric information about your company to make a
competent buy/hold/sell decision then yes by all means diversify it all.

I just want to make sure the point about asymmetric information is clear
though. And it's more relevant in private companies than public ones.

If you're not willing to buy and hold private company equity even after having
access to asymmetric information about the firm, then you should consider
leaving the company entirely. If you don't then that defeats the entire
purpose of taking a chance on a private company and being compensated in
equity which can't be acquired through traditional means. You're accepting the
equity presumably because you think it's worth a lot more based on the
asymmetric information and market opportunity.

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hkmurakami
As Matt Levine said, if you owe the bank a million dollars, you have a
problem. If you owe the bank 100 million dollars, the bank has a problem.

~~~
staticautomatic
I don't know who said that first but it certainly wasn't Matt Levine.

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lainga
But the big question (for longtime readers) is: does that misattribution count
as securities fraud?

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Atheros
Did you disclose to your employer that you were going to ask that question on
HackerNews? If not, that's securities fraud.

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iamsb
Given that softbank is a public company, surprised there is not more
shareholder outcry over the strategy of visionfund. In a way it is public
money which is bailing out WeWork. Not to mention some of the questionable
investments in Indian market (OYO, PayTM, Snapdeal) that seems to follow hyper
valuation growth without seeing hyper value of growth of any of these
companies.

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Aeolun
I don’t think anyone is to blame here except the people that gave him money in
the first place.

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w-j-w
You honestly can't think of anyone else who is responsible? How is WeWork not
fraud? How was it legal for Neumann to take all of that money?

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somebodythere
What is fraudulent about WeWork?

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wpietri
This is a problem with the modern age. If someone is too clueless, arrogant,
or deluded for us to prove they had criminal intent, is it really a crime?

In my ideal world, yes. But under the US justice system, perhaps not. Both
political and business leaders have gotten away with amazing amounts of what
I'd say is at best criminal negligence because they say, "I didn't know" or "I
thought it was fine" or "I believe in my vision".

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olliej
Yet any early employees who signed on with compensation in the form of stock
grants/options/RSUs have lost out on years of compensation.

Claiming that it's a risk/reward tradeoff is nonsense, as ICs don't have any
meaningful say on the path to exercising their "income", and there are huge
incentives for founders and VCs to arrange deals like this.

I really hope that people start realizing that this is a core behavior in
business and stop letting themselves be screwed by people who aren't actually
taking on meaningful risk.

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Aloha
I've been saying for years that stock grants/options/RSUs are like playing the
lotto, and salary/benefits are more important. They're also a tool to keep
people in roles they no longer want, because of a promise of a great payoff
someday.

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mrep
How are RSUs like playing the lotto if you work for one of the big 5 (GAFAM)?
I work for one and my RSUs vest monthly and they are autosold so i get a USD
based direct deposit each month. While it does very slightly, I wouldn't
consider it the lotto.

~~~
dickeytk
You were awarded them 1-4 years ago though. That's when the value mattered.

To add to that, it's not like when you join a low-performing company you can
just leave because you think you can get better value somewhere else. The cost
of switching as an employee is very high.

Obviously it's a bit less of a gamble than the lotto, but it's not like
decisions that were made 30 days ago are being played now, it's much longer
term than that.

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justboxing
Since when did loss making pre-IPO companies become "TOO BIG TO FAIL" ?

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nevir
When they own/lease a shit ton of physical assets

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anonu
I don't think they have many assets on their books, relatively speaking. They
lease most, if not all, their property. Neumann took personal loans to buy
properties, keep them off balance sheet, and leased it back to wework.

This news came out well before the s1. It's a miracle it took the s1 to get
investors to give a damn when there were so many governance issues and
conflicts of interest out in the open well before.

~~~
ageyfman
they're one of (if not the) largest lessees in NYC (and other cities around
the world), with long-term leases. A lot of landlords would have a conniption
if these guys went out of business. Would rock the commercial RE market.

~~~
jjeaff
I find it hard to believe they are the largest lesee in NYC. They aren't even
the largest co-working space rental company (it's Regus, by a landslide).

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anm89
This redefines failing upward.

The lunacy of this is astounding.

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dehrmann
Not really. WeWork had $12.8B in funding. Now they're valued at $8B. They'll
be valued at a lot less if they go bankrupt, so if Softbank can stabilize the
company, they can cap their losses. Risk is also baked into that valuation, so
if Softbank fixes things, they'll come out ahead.

~~~
anm89
Another perspective would be he got probably one of the 10 or 20 biggest pay
days in history for giving We an 80% haircut. And that was directly on him.
All he had to do was stop being a jerk and they probably would have slid
through.

I'm comfortable calling 80 a failure.

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empath75
I have to ask when are the investors in softbank or the vision fund going to
question this bail out? I’d be furious if it were my money being flushed down
the toilet this way.

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rapsey
I read somewhere that softbank is a huge benefactor in japan central bank QE.
So basically vision fund is for people with more money then they know what to
do with and didn’t really earn it the hard way.

They could have spent it more wisely.

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nihonde
There is a hell of a lot of money that doesn’t have a safe home. If you’re
wealthy in 2019, it may cost you money just to stash it somewhere low risk.
Now extend that to sovereign funds, etc., and you can start to see why these
obvious shenanigans are tolerated. A zero percent “return” is a net gain over
holding in savings or bonds in a lot of places.

~~~
PhantomGremlin
It depends on your definition of "wealthy".

If you're worth less than 12 digits, you can easily "stash" your money in
3-month US treasury bills. They currently yield about 1.63%.
[https://www.bankrate.com/rates/interest-rates/91-day-
treasur...](https://www.bankrate.com/rates/interest-rates/91-day-treasury-
bill.aspx)

Granted, if you're a Russian Oligarch or similar, this might not meet your
definition of "a safe home". Otherwise, they're about as low risk as possible.

I agree with your take on sovereign funds etc. The whole world can't just park
its excess cash in T-bills.

But unless you're talking about the dumbest of this money, it should be very
broadly diversified: worldwide stock markets, bonds, real estate, natural
resources, and smaller amounts to things like venture capital.

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Amygaz
How does one justify giving $1.7B to someone who looses $219k/h?

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anonu
How do you get around the paywall? The usual tricks don't work... Besides
paying money.

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dehrmann
> paying money

One trick to rule them all.

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karpodiem
Elizabeth Holmes should have doubled down!

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tibbon
Lesson: If you're rich and mess up, you'll become yet more rich.

