
WeWork Gave Founder Loans as It Paid Him Rent, IPO Filing Shows - AndrewBissell
https://www.bloomberg.com/news/articles/2019-08-14/wework-gave-founder-loans-as-it-paid-him-rent-ipo-filing-shows
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40acres
It's almost as if this company was founded with the explicit mandate to
maximize grift. I don't understand why any investor would get involved.

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AndrewBissell
All the cultish language around "raising the world's consciousness" is
particularly bizarre. Like an episode of _Silicon Valley_ made real.

Referring to a CEO by his first name is a red flag, too.

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MFLoon
> Neumann took out a much bigger loan from WeWork a few months ago. The
> company lent him $362 million in April at 2.89% interest to help him
> exercise options to buy stock. This month, Neumann repaid the debt by
> surrendering the shares back to the company. It’s not clear from the filing
> why these transactions happened.

Can anyone explain a possible motivation for doing this? It seems like it's a
completely circular transaction, or is my fraudster-fu just not strong enough
to see the upside?

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darawk
This is a perfectly reasonable transaction. He just wants to exercise the
options and then sell the stock. The loan was just a formality to make it
easier to do that, there's no fraud here.

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zouhair
That this passes as reasonable transaction is the insane part.

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dogma1138
This isn't that unusual, many companies with ESPP's and options offer loans to
their normal employees to buy stock or exercise their options.

This is pretty much the same like when a company offers an employee share
purchasing program where you can buy say $20,000 worth of restricted stock
within the allotted time window which is usually a few weeks but your company
then spreads the payment over 6-12 months by deducting your pay each month.

Companies also offer a similar service when you have options vesting they
offer to pay the tax for you that month and spread it out over several months
so you won't have to immediately convert some of the shares you get to pay for
exercising the option.

Just for reference my US employer in the UK offers this, several other
companies in the UK i worked for also offered similar services.

Companies here offer loans all the time including for things like seasonal
train tickets (some forfeit the loan and you have to pay just the tax value on
it after a year of employment for train passes) and other large expenses which
are work related.

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quaquaqua1
I think this is a very similar strategy to what Eddie Lampert did with Sears.
Through a network of companies and controlling stakes, Lampert took possession
of Sears, sold its assets to his own fund, and then leased the buildings to
other tenants.

It's a very interesting network of financial engineering that really is quite
intricate since I imagine commercial real estate is a very supply-constrained
market, which is why they can charge such high rent with seemingly not much
value provided.

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hendzen
Yet another recent display of aggressive, excessive financial engineering.
This is notable in WeWork’s case for being done in a pre-IPO startup, but is
inflicted every day upon lesser known companies by legions of PE firms. This
is late cycle business tactics - the relentless, desperate pull of any future
value - real, imagined or invented - in to the present. The result of greed,
hubris, and a decade of overly loose monetary policy. That this shameful IPO
is coming to market is a sign the music is coming to a stop. Batten down the
hatches.

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AndrewBissell
Can the HN mods point to the preexisting link to this article? This was #1 on
the front page when it was marked as [dupe].

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huffmsa
I feel like this guy thinks he's playing 5D chess, but his friendly
neighborhood SEC agent keeps dropping by and ruining everything and the plan
du jour fizzles out.

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halfmatthalfcat
Articles have been trickling out about We’s shadiness over the past year or
two, so what is the average person suppose to do/think? Capitalism gonna
capitalism? Don’t buy We stock? Or just watch another episode of “Startup
Drama in America” play itself out?

With the turmoil of Uber/Lyft, Tesla and now We, I’m just looking for more
popcorn...

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bradleyjg
> Don’t buy We stock?

That means forgoing most of the broad based index funds. I don't love that
idea either.

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AndrewBissell
Which broad based index is going to include WeWork?

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bradleyjg
VT and VTI certainly. At anything close to its proposed valuation S&P500 funds
too.

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AndrewBissell
No, stocks cannot be added to the S&P 500 unless the previous 4 reporting
quarters taken in aggregate were profitable.

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bradleyjg
Good to know, thanks.

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durron
[https://outline.com/AW7mde](https://outline.com/AW7mde)

Non paywall

