The thing begins with an epigram: “We dedicate this to the energy of we — greater than any one of us, but inside all of us.”
The energy of we.
I get it from a branding perspective — they’re literally calling themselves The We Company — but, you know, normal people would just say “our energy.” I tease Silicon Valley’s tech companies a lot, but New York easily matches them in ego.
Anyway, please join me on an annotated trip through my favorite parts of the mandatory filing.
You pay rent on your desk or whatever, and then you don’t have to work in the same place you live. (There are also conference rooms.
) And yet the word “technology” appears 110 times in the S-1. “We provide our members with flexible access to beautiful spaces, a culture of inclusivity and the energy of an inspired community, all connected by our extensive technology infrastructure,” The We Company tells us.
But I am having the damnedest time figuring out what the “extensive technology infrastructure” is. Does this just mean Wi-Fi? Is it the neon lights? Is it… lasers?
I’d try to explain it, but I don’t understand what the fuck is happening.
The We Company isn’t a tech company, though it is very successfully posing as one. It also has investments in a private club targeting women called The Wing; The We Company owns a 23 percent stake, according to these documents.
Its other investments are mostly real estate. This is to say nothing of the fact that there are two ways the company makes money: 1) from people paying fees to lease its shit, and 2) from sponsorships and ticket sales for events.
The We Company’s main competitor is IWG, a real estate company that is not pretending to be a tech company, as Recode points out. “IWG has had substantially more square footage and more customers, and has actually made a profit — yet its market cap is just 8 percent of what SoftBank’s latest funding round thinks WeWork is worth,” Recode helpfully tells us.
Anyway, I went further into the documents, and wow.
Adam Neumann, CEO of The We Company, and Rebekah Paltrow Neumann, founding partner of The We Company and first cousin of Gwyneth, have a succession planning document that does not even consider the possibility of divorce. If anything happens to Adam, Rebekah plus two board members (in some circumstances, of her choice) get to pick the next CEO.
Now, if Rebekah can’t do this — perhaps because she is dead or disabled — a trustee acting on behalf of the Neumann estate will pick up the work of finding a new CEO. This company appears to be all about the Neumanns, especially Adam Neumann.
A major risk factor: Adam Neumann
Adam is a risk factor. Seriously, check the Risk Factors section.
“Adam will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors. As a founder-led company, we believe that this voting structure aligns our interests in creating stockholder value.
” Well, it creates value for Adam, anyhow.
Adam Neumann bought buildings that he then leased to WeWork, The Wall Street Journal reported in January.
Adam made millions on the deals. In May, he said he would sell the properties that WeWork leases to a real estate investment unit run by WeWork and funded by outside investors, The Wall Street Journal reported.
The investment vehicle, called ARK, will manage Adam’s holdings in 10 commercial properties, the IPO form says. Four of those properties are leased by WeWork.
<img style="max-width: 670px" src="http://www.ladieswantmore.
This chart from the S-1 forms describes ARK’s structure.
I don’t understand it either.
Adam is also $97.
4 million in the hole to JPMorgan Chase “across a variety of lending products, including mortgages secured by personal property,” though those “lending products” aren’t secured with We Company shares. Incidentally, JPMorgan Chase is one of the underwriters of The We Company IPO.
Before 2019, Adam had not received any equity awards, the documents say. But as The We Company got larger, the board of directors decided to give Adam reason to do an IPO, so Adam received options to purchase more than 42 million shares.
The breakdown of the shares in Adam’s compensation package is as follows:
9,438,481 options vest every month for five years
9,438,481 options are performance-based vesting and vest monthly for five years
7,078,861 options will also be granted monthly “if we attain a public market capitalization of $50 billion and vest monthly for a period of years after that”
7,078,861 options “meet the performance-based vesting conditions if we attain a public market capitalization of $72 billion, and vest monthly over a period of two years from that date”
9,438,481 options “meet the performance-based vesting conditions if we attain a public market capitalization of $90 billion, and vest monthly over a period of two years from that date”
Adam repaid the loan this month by giving the shares back. “Following the settlement of this loan, the Company issued to Adam the number of profits interests equal to the number of shares surrendered by Adam in settlement of the loan.
” I am not totally sure I follow this sentence, honestly, but it seems like Bloomberg’s Shira Ovide did, and here is how she describes it: “Neumann swapped out a portion of those options the company valued at more than $360 million in a complicated transaction with the company that gave him a financial instrument tied to future WeWork profits.”
From the filing:
One of Adam’s immediate family members hosted eight events relating to our Creator Awards ceremonies in 2018, for which she was paid an aggregate of less than $200,000. Another one of Adam’s immediate family members has been employed as head of the Company’s wellness offering since 2017, and he receives less than $200,000 per year for acting in this capacity.
Also, while we’re talking Adam-related risk factors: interviews Adam gave to Business Insider and Axios possibly violated the Securities and Exchange Commission’s IPO quiet period. They’re listed in the form as risks to the business.
In total, as Shira Ovide at Bloomberg points out, there are 10 pages’ worth of the filing that are just disclosures about Adam.
What about Rebekah?
Rebekah, Adam’s “strategic thought partner,” appears significantly less often. As I mentioned, she’s never received a salary.
She also kicked up a fuss in September 2018 by making some pretty weird comments about what women are supposed to do, according to CNBC: “A big part of being a woman is to help men [like Adam] manifest their calling in life.”
This is a dim view of marriage: only one partner can “manifest their calling in life.
” While The We Company walked back those comments — sort of! — by adding more context, it didn’t help because the context is: “The reality that I see today is that there is nothing bigger that women can do, in my opinion, than empower their partners — and that can be a man, a woman, a friend, it doesn’t matter, but empower others.”
At Cornell University, she majored in business and also studied Buddhism. Actually, I’m just going to quote her biography on WeGrow: “Rebekah has traveled the world apprenticing and studying under many Master Students, such as His Holiness the Dalai Lama and Mother Nature herself, and is committed to creating an educational community that fosters growth in humans’ minds, bodies, and souls elevating the collective consciousness of the world.
“It’s not even a blurred line. There is no line.
Since Rebekah is the one in charge of branding, I presume the following sentence from the S-1 is her doing: “We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness.
“SoftBank’s strategy has been to put enormous sums — its smallest deals are $100 million or so, its biggest are in the billions — into the most successful tech startups in a given category,” Sarah McBride, Selina Wang, and Peter Elstrom wrote in a Bloomberg profile last year.
(If you are reading this, anonymous source, please drop me a line. You sound fun!) The investments made by SoftBank are huge — and often push the companies SoftBank has invested in past their competition in both valuation and scale.
In January, SoftBank dropped another $2 billion into The We Company, bringing it to a valuation of $47 billion, according to The New York Times. SoftBank’s total investment in The We Company — including those made by its Vision Fund — is something like $10 billion, that report said.
That $2 billion might seem enormous, but it wasn’t as big as one of the deals SoftBank considered: buying out all other investors for $10 billion and then adding $6 billion more to The We Company, The Wall Street Journal reported.
In early January, several papers reported that the SoftBank cash injection was smaller than expected. And “in the first half of 2019,” the CEO got his first performance incentives, which are tied to the public market, per the documents.
An elevated consciousness of downside risk
And it’s still trying to grow.
I don’t know, friends.
I just don’t know. I have never seen anything like this, and I cannot wait to see what the SEC has to say about loaning your founder, CEO, and controlling shareholder money while also paying him rent.
This is to say nothing of who got paid by the name change or any of the rest of it. “As an investor, why would you be willing to put your confidence in this structure?” Charles Elson, a corporate governance professor at the University of Delaware, told Bloomberg.
I am very excited to find out who will pony up for shares. Whee!