WeWork Employee Options Underwater as Ex-CEO Reaps
wsj.com
wsj.com
It would seem crazy to me that the founder would get such a big payout, on the other hand, it also seems this could be a massive win for Softbank if Wework could get back on track?
The founders retained voting control of the company when they raised outside capital. SoftBank - really, Masayoshi Son - is now buying both the voting control and the shares. Since these things have value, SoftBank is paying for them, though less than they would have 6 months ago and potentially less than they would have at the time they invested.
If you want to blame anyone, blame SoftBank for negotiating very poorly as they invested in WeWork. I’m not convinced that anyone is to blame, though, since SoftBank had every right to make that decision and all parties knew the risks. Everyone, including employees, knew and accepted that the founders controlled the company in perpetuity… which made no more sense 3 months ago than it does now. At some point, something like this - the founders or their heirs selling their control and equity - was going to happen, even if it was 5 or 50 years in the future. The company was transparently structured to put the founders first.
When the founder is as big of a toxic drag on the company image as he is, it's probably worth more than $1B to Softbank to make him go away quietly and remove any vestige of his presence.
Not saying I'd ever want to work with Neumann, but arguably he wasn't the worst of the drag. He successfully got Son/SoftBank to believe WeWork was worth up to $47B, and got a ton of money while retaining control of the company.
I wonder if WeWork might have been better off (at least in the short/medium term) if Neumann had stayed on and they'd've gone through the IPO.
In spite of his mistakes and failings, the guy founded and grew a huge global company which is still valued in the billions, and kept voting control all the way through.
If investors want him out, it's only right that they write him a big cheque.
WeWork is an office subletting business. That is _all_ it is.
I am asking seriously because this is something I do not understand. Were they fooled by someone?
If I get part of my salary in variable then I cannot be that surprised if that variable is zero.
That's unjustifiable hyperbole. WeWork is (was) certainly a very strange company, with a very strange founder, and a very strange mission, but I don't see any actual fraud involved (if there's further investigation, fraud may certainly turn up, but I don't think that's a reasonable accusation given what we know now). Neumann built a real estate company, convinced some surprisingly-gullible investors that it was a world-changing tech company, and for the most part did what he advertised: built up a ton of owned or leased office space and then re-leased it to small businesses.
> The company is so broke it can't afford severance for regular workers
That's unfortunately common with growth companies who don't give themselves enough runway in the assumption that funding events will be frequent and reliable, and then find that assumption to be false. That's the failure story of many, many startups. WeWork has just gotten a ton of press owing to its size, eccentric founder, and investors.
Regardless, laid-off workers are not owed severance; it's a nice thing to do, but as a worker, expecting that safety net as guaranteed in a place with at-will employment is foolish.
He played the game remarkably well: he managed to get a prominent investor to believe the company was worth a ton of money. The public markets disagreed quite vehemently on that value, and yet he still managed to retain a huge amount of leverage to the point where he's being paid quite a hefty sum to give up control.
It absolutely sucks that many of the regular rank-and-file are getting shafted, but that is one of the many risks you take on when you join a startup where you have a low salary, compensated by private-company stock options funny-money. If you (for example) have a family and no other source of income, you should not take that deal. If you take it anyway, and it blows up in your face, that's on you. Humans are unfortunately remarkably bad at risk assessment sometimes.