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Comment by danrocks | Hacker News Reader

I have always wondered how Neumann was able to afford all of this. Did he sell shares of WeWork to SoftBank? Obtained some loans giving illiquid shares as collateral? I really don’t understand how these founders get so rich with a money losing business without selling shares in an IPO. Sounds like a financial engineering orgy.

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It's estimated prior to the IPO in 2019, he had cashed out close to $778m through late-stage private stock sales and consulting fees.[1] Then it was litigated, and he only got $480m + $50m in legal(!)[2]. Unclear if how much of those two are additive vs the same amount reported poorly over time. It was also rumored he sold more stock before those final rounds with Softbank.

Plus, he still has something like 88m shares still in wework[3]. Hopefully he didn't margin-loan those shares.

Safe to say, he did better on wework than anyone else - a rare moment where the founder of a failed company has a better outcome than the investors

1 - https://www.fool.com/investing/2022/01/04/wework-co-founder-... 2 - https://archive.vn/bBW2d 3 - https://fintel.io/n/us/we/neumann-adam

This was covered in WeCrashed (and not sure how entirely accurate it is) but JP Morgan gave him a huge line of credit with his shares as collateral.

So he didn't cash out. Didn't pay cap-gains on those. Yet, generated cashflow from the shares.

As a common person, I've been looking into this myself with my RSUs and option grants. But there aren't credit lines that banks offer using equity as collateral for the common person.

I guess when your net worth is high-enough, you can pull anything off with the banks.

Charles Schwab Pledged Asset Line [0]? equities as collateral, gain a line of credit.

Fidelity Fully Paid Lending Program [1]? not quite what you're looking for, but still generate cashflow from owned equities.

[0]: https://www.schwab.com/pledged-asset-line [1]: https://www.fidelity.com/trading/fully-paid-lending

Disclaimer: i am not a fiduciary, nor a financial professional. this is not financial advice.

You have to be big enough that a bank will take time to work it out by hand; and I suspect the bank that gave him the loans was also prime on doing business with WeWork (and potentially an IPO).

The closest "normal" people can get to this is with real estate.

Yes. Ultra high net worth individuals actually have separate banks within the banks. They will have a private banker for their accounts. And the private bank often has a separate balance sheet and policies.

He got the payout of $480m as a settlement for stepping down. But he also got a $1b when Softbank bought out shareholders:

"Neumann led WeWork to a failed attempt at an initial public offering in 2019 and was ousted shortly afterward. As part of the original bailout effort, SoftBank had agreed to buy $3 billion in stock from WeWork investors, including close to $1 billion from Neumann."

https://www.latimes.com/business/story/2021-02-26/softbank-s...

Apparently SoftBank backed out of that payment.

Neumann had lines of credit from banks secured by his wework equity. Kind of like a home equity line of credit but with stock instead of a home.

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