WeWork S-1 Shadiness


Emailed on August 23rd, 2019 in The Friday Forward

Thought that Toptal story was interesting? Here's one from a little company called WeWork... I mean.. The We Company. (That will be more relevant in a few seconds)

As Dan Primack of Axios said best, "WeWork has long been a unicorn piñata. It’s wildly unprofitable. It’s cultish. It’s real estate masquerading as technology. 

I've been one of the doubters that came around to the WeWork bull case, but damn if it's hard to like this company once you learn of the mess that is its balance sheet.

The most egregious line item is WeWork paying founder and CEO Adam Neumann $5.9 million for the “We” trademark when it formally changed its name to “The We Company.”

Again, quoting Primack, "There is just zero defense here, even if Neumann originally planned to use the trademark for unaffiliated businesses and it subsequently gained in taxable transfer value because of WeWork. It’s abusive of the company’s balance sheet."

Real estate structures are confusing. Entities everywhere, interconnected in unclear ways because...it's real estate. But WeWork's S-1 brings this kind of confusion to a whole new level.

Among issues like the one above, there are personal loans made to Neumann that are secured against his (still illiquid) stock... that is about to become liquid. And that doesn’t address the IPO-simultaneous $6 billion debt facility, which can be read either as a vote of confidence/alignment of interests or as a deepened conflict.

Hard to invest in a company that is designed as, among other things (as I sip some fruit water), a web of confusion.

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Sean Steigerwald