Yeah. To some, the statement might have set off alarm bells; to Masayoshi Son and SoftBank, it was like a blinking red light reading "please invest in me." Thanks in no small part to SoftBank's recent largesse, WeWork is now valued at $47 billion, with plans for a long-awaited IPO in the coming months.
How will opinions about that IPO change if, say, it came to light that Neumann had spent the past several years unloading hundreds of millions of dollars of WeWork stock? We're about to find out. A bit of a bombshell from The Wall Street Journal has linked Neumann to what could be an unprecedented instance of a founder selling off pre-IPO stock—which is one of nine things you need to know from the past week:
1. WeWorkplace dramaIn total, Neumann has cashed out more than $700 million from WeWork dating back to 2014 by selling some shares and also borrowing against his remaining stake, according to the WSJ report. Axios reported that $300 million was in direct sales and another $400 million in loans. Neumann is said to still be the company's largest shareholder, and he used the loans he took out in part to exercise stock options early and buy more WeWork shares—two facts that may assuage some concerns. But probably not all of them.
A founder selling off such a large portion of his stock before an IPO would generally be considered a bad thing. It's largely a matter of aligning incentives, a corollary to the skin in the game that LPs often require from their GPs. Investors typically feel better about a CEO's motivation to increase a company's stock price if that CEO owns a large amount of said stock. You make money, I make money, all's well.
WeWork's announcement earlier this year that it had confidentially filed for an IPO in late December adds another layer to things. If Neumann is cashing out to the tune of hundreds of millions of dollars now, before the IPO, it would stand to reason that he might be skeptical that the value of the shares he's selling is going to go up once the offering does occur. To an outside observer, it certainly doesn't appear to be a vote of confidence in the planned listing. Is Neumann losing faith in the power of community-adjusted EBITDA?
I enjoyed that the WSJ story from this week used the same lead photograph as a recent must-read profile of Neumann from New York magazine, which tells the story of the founder's rise to prominence, his penchant for a party-friendly workplace and his "megalomaniacal ambition." That seems to have made WeWork a perfect fit for the aforementioned SoftBank and founder Masayoshi Son. Son is famous for telling prospective investees that they need to think bigger. With Neumann and WeWork's stated desire to build a $100 billion business, Son seems to have found the perfect target.
But Neumann's cashing out is the second bit of eyebrow-raising news to emerge about his dealings with WeWork so far in 2019. In January, the WSJ revealed that Neumann owns a significant amount of real estate that he then leases back to WeWork, creating a bit of an interesting dynamic of incentives.
The point being, we'll be keeping a close eye on WeWork's IPO whenever it does occur—an analyst day for investment banks is scheduled for July 31, per Reuters. As if being the most valuable VC-backed company in the US wasn't enough.