Correctly or, more likely, not - it seems the payoff was made in early 2021 at a time when valuations were soaring and there was a renewed push for an IPO. Neumann could have blocked that.
If I'm parsing a quick read of the data correctly, they backdoored an IPO in October 2021 at an $8bn valuation - and shares jumped 13% (so + $1Bn). A snapshot at that time could be used to argue they paid Neumann $x00 million to realise a multi-Billion dollar valuation and $1Bn+ growth in market cap.
Could they have forecast the rapid decline thereafter? Maybe some of those investors didn't care, as long as they got some return? If Neumann had dragged the battle out for another year, into 2022 when the markets went South, it probably would have cost WeWork a lot more on paper than whatever they paid him.
https://www.businessinsider.com/wework-ipo-fiasco-adam-neuma...
The IPO in October 2021 at $10B but then it has continued to slide now down to $250M. That IPO does seem to be trying to get some value out of this turkey by passing it off to public investors.
There was never a viable business here, just hype. Going through its finances that are public, it has never made any money. Its net losses per year are roughly its income in most years. Its valuations were completely speculative.
Why in 2021 did they give him that payout? Likely because they thought it offered the best ROI moving forward (and for some shareholders, especially anyone who sold at the post-listing peak, it did).
It definitely wasn't recognition for past success.
But it's certainly dubious enough to warrant a lawsuit to see if there were false claims made.
This makes no sense to me.
Why would you pay hundreds of millions of dollars to someone for a paper valuation and market cap? It was all meaningless.
Imagine you could buy a house for $200,000, live in it for a year, and then sell it for $1M. Would you take that deal, even if you didn’t like the seller?
"We invested in a company structured so that the CEO could hold us to ransom, and agreed the bad terms because we thought the CEO would have breached his fiduciary duty to other shareholders and blocked advantageous exits if we didn't pay his ransom first" doesn't sound any better...
I actually kind of respect Neumann. Not in a moral/ethical way, of course, but in a defend-yourself-at-all-times way.
He never would have gotten that payout if he hadn't legally fortified his position like he did, and then successfully maintained it through SoftBank's initial due diligence.
"Heads, I win. Tails, I win." type stuff.
The public fund managers would be the ones guilty of not doing their due diligence.
Softbank's "investment strategy" would've ended the company decades ago if it didn't buy a quarter of Alibaba for $20m, a share that would end up being worth over $100b a few years ago.
https://www.wsj.com/articles/softbanks-boss-bet-22-billion-o...
*Implications:* They then pushed companies to expand way faster then was appropriate. This meant that companies made decisions that was not justified by the profitability, just because they needed to spend the money. Example would be that WeWork starts offices the best most expensive areas of manhattan and then serves them to customers at effectively a discount (fundamentally unprofitable decisions)
Basically, even solid companies would be forced to spray and pray money. Generally, speaking more money may bring greater velocity but you need to understand if the market is going to change at the same rate. For WeWork, the commercial office space market has leases typically for 5-10 years. Bottomline, there is not enough "liquidity" to absorb that quick an expansion.
WeWork is an extreme case, but this kind of thing happens with tech companies all the time.
Why do you think people in Silicon Valley equate an "exit" with success? Because at that point the insiders are paid out. What else matters?
Look at companies like Uber, Coinbase or Snap. Even Tesla. Insiders have accumulated billions in compensation that dwarves the value generated by the companies themselves (as measured by earnings).
Thank you for coming to my Ted Talk
I don't see where the logic of your comment comes from either way though - capitalists are typically in favour of a free market, no? And typically the "purpose" of a free market is accruing wealth as part of a private enterprise?
E.g.: Democracy, oligarchy, dictatorships are forms of government.
Capitalism, socialism, etc... are economic systems.
I point this out because people in my country sometimes forget that it's a system of elected officials that govern us, not capitalism.
That's why we see so many mergers and intensive lobbying for government regulation in things like healthcare, telecoms, and air travel, it's way easier to make money if you can restrict competition in your market and it's something essential to consumers
No, that's not what defines capitalism at all. That's a degenerate form more usually called "predatory capitalism".
In what was is predatory capitalism not the rule of the day?
He deserved every penny of it as far as I can see.
What’s the alternative? That his stock and voting rights went to SoftBank for free?
Brands built upon selling product for less than it is worth are easy to build up. That isn't a real business though, it is just VC-funded make believe.
> What’s the alternative? That his stock and voting rights
Wouldn't it have been better back when WeWork's IPO failed to materialize in 2019 for SoftBank to just stop investing in WeWork it dropped from a planned $100B to $5B in a span of a year or so? And then SoftBank continued to invest to gain control and keep it afloat. Definitely a situation where someone is throwing good money after bad. Should have just left it for dead then.
That is the alternative. And it would have been best for the investors for sure.
In the end SoftBank just offloaded this turkey to the public via a SPAC merger. Did SoftBank end up making any money off this at all? I suspect there was no liquidity for the shares in this SPAC thus I bet they recouped almost nothing from this whole debacle.
Why do people think selling dollars for 75 cents is some incredible achievement to be lauded?
It's sometimes surprising how shocking simply knowing people is.
> WeWork founder Adam Neumann received $245m in company stock [....] In addition to the $245m grant, Neumann received $200m in cash, was able to refinance $432m in debt on favorable terms, and allowed a finance company controlled by the former chief executive to sell $578m in WeWork stock. [1]
That guy got incredibly rich creating a company that was clearly not viable and seems likely to bankrupt. Corporate government seems to be non-existent here.
Who are the people that are left holding the bag? Hopefully it is mostly just private money like the Saudis + SoftBank (if they screw up, they suffer the consequences, that is great) and not public pension funds. Otherwise, the public fund managers should go after this complete lack of governance and oversight.
[1] https://www.theguardian.com/business/2021/may/27/wework-foun...