Guest Post by Simon Black
In 2010, New York-based entrepreneur Adam Neumann had an idea: to lease office space to companies all over the world on a short-term basis.
Usually when a company leases office space, it has to sign a long-term contract; but Neumann wanted to lease space to businesses for terms as short as one month.
It wasn’t an original idea. Companies like Regus have been doing that for decades. But Neumann had two key twists:
1) Make the offices cool… so cool that even millennials would want to hang out there. So he brought in free tequila, gourmet coffee, and chic designs.
2) Lose an absurd amount of money in the process
And so began the journey of WeWork nearly a decade ago.
Since then, the company has grown to hundreds of locations. Yet the more successful they became, the more money they lost.
By 2018, WeWork was losing nearly $2 billion annually, and there was no end in sight.
The more money they lost, the more money they had to raise from investors. But the company seemed to have no problems selling billions of dollars worth of shares at progressively higher valuations.
Finally, the music stopped a few months ago. WeWork (technically called the ‘We Company’) filed IPO paperwork disclosing not only horrendous losses, but some of the most appalling shenanigans ever seen from a major company CEO.
Neumann, it turned out, had personally enriched himself time and time again at company expense.
I’ve written about this before–
1) He sold the rights to the word ‘We’ to the company for $6 million.
2) He borrowed money from the company to buy office space, only to lease that office space back to the company at a profit.
3) He sold off hundreds of millions of dollars worth of his own shares while simultaneously convincing investors to put money in the company.
4) Yet despite selling his shares, he awarded himself special rights to be able to out-vote everyone else, cementing his control over the company.
The list really does go on and on… and I expect there will be a Netflix documentary about Neumann’s unethical self-dealing some day.
Point is, the bubble burst. Investors weren’t putting up with it anymore, and WeWork had to cancel its IPO.
And without an IPO to bring in billions of dollars of new capital, WeWork is now in a terrible cash crunch and rapidly running out of money.
They need to cut costs in a big way… and that means laying off staff.
But WeWork is so broke, according to Bloomberg News, that they cannot even afford to pay the severance packages necessary to lay off employees.
In other words, WeWork is too broke to keep its employees. But it’s too broke to lay them off.
That’s a pretty desperate position.
So just yesterday, WeWork’s lead investor– the SoftBank Vision Fund– came in with an emergency funding offer to take supermajority control of the company.
(A “majority” shareholder owns more than 50% of a company. But even at that level, there are restrictions in terms of what a majority owner can do. A “supermajority” means that the Vision Fund will control 80% of WeWork’s shares; that’s generally the threshold required to give a shareholder carte blanche to do just about anything they see fit.)
The deal values WeWork at $8 billion. That’s an 83% decline from the $47 billion valuation they were expecting just a few months ago.
As part of the deal, though, Neumann could personally profit by as much as $1.7 billion. His ‘consulting fee’ alone is worth $185 million.
Pretty amazing. They’re giving a huge payout to the guy who plundered the company for his own personal gain and nearly ran it into the ground.
Thousands of people will lose their jobs because of Neumann’s mismanagement. Investors who have already sunk billions into the company are left to clean up his catastrophic mess.
Yet this guy walks away with a $185 million ‘consulting fee’. What a load of shit.
Sure, it’s irritating to watch someone who was so self-absorbed and destructive receive such absurd benefits. And the Internet is on fire today with people justifiably bashing Neumann.
But what I’m thinking about it how the fire will spread.
This is the sort of news that Bolsheviks live for. When a billionaire gets bailed out and thousands of people lose their jobs as a result– it gives capitalism a bad name and fuels their Socialist rage.
Bolsheviks already believe that entrepreneurs, business executives, and value creators are a bunch of greedy scumbags.
And Neumann has just single-handedly reinforced that negative stereotype.
Plus he’s provided endless ammunition for the Bolsheviks to propose new tax increases, regulatory handcuffs, and government oversight.
(Naturally these people believe that government is purer than the driven snow, and that their proposals will protect ordinary, hard-working people from greedy business scumbags.)
Neumann doesn’t have to worry about any of the destruction and consequences he’s caused– he now has generational wealth.
But for anyone else that aspires to start or grow a business, life could certainly become a lot more taxing as a result of his ineptitude.
This is a classic case of one moron ruining it for everyone else.
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A thoroughly dishonorable individual. It is utterly morally wrong for him to walk away with all that ill-gotten wealth. I can honestly say that I would walk away from the wealth rather commit such an irredeemable act.
Seems like a brilliant guy to me. He completely understands the post capitalist era and how to make money in a world where up is down and right is wrong.
He’s a colonist and he’s simply extracting the resources that the natives are too stupid to know what to do with, like the British opening diamond and gold mines in South Africa.
And here comes some pedantic analyst trying to use western principles and values to explain why it shouldn’t have happened. Could this be any funnier? I submit that it could not.
Drank your coffee black this morning, HSF? Because your humor is way dark today.
Da P
It’s the shortening days. Harvest, slaughter and putting everything up for Winter does something to your perspective.
The longer I am at this- the agrarian life- the more the scales fall away. It is deeply sobering to realize how many otherwise intelligent and valuable people are victims to the greater deceptions of our time simply because they no longer have the ability to see the world as it is, rather than how they imagine it should be.
Ten more bushels of apples to press, going to be a great year for hard cider.
Ah, I see your perspective. No slaughtering on my tiny estate but the fruits are all harvested and put up, almonds shelled and dried, and all but one garden bed is stripped. Next up is to get the garlic planted and then put up a couple cords of firewood. I’ll be able to slow down after we get the hard cider cellared, some jelly made, and the balsamic vinegar bottled. Have fun at the press!
Nope just a crook is all A smart crook but just a dirty crook none the less
You’re confusing the intent of the law with the letter of the law. Those who know how to best to circumvent the callow come out on top. That’s how it works in a multicultural society.
Celebrate it.
He’s not even raping the Earth.
Him and his “investors” are just playing with monopoly money and empty commercial spaces.
Adam Neumann was born in Tel Aviv, has dual citizenship. Rather than “capitalism” being blamed, perhaps other coincidences would be noticed.
(((He))) was born where?
Wow, incredible! How can I copy what he has done?
Perhaps you haven’t noticed–but this guy walks with over 100 million hondos for not breaking a sweat.
And the rest of us pound nails, paint walls and so forth for a few semi-worthless paper chits.
I’ve been looking for a business with few moving parts–love the idea.
One moron is responsible?
Just pin stuff on individual figureheads like Neumann or Musk or Trump or whoever?
Somewhere in a smoke filled room, a committee of old boys chuckling over how much money they made pulling off this scam.
That’s right, he is a winner, and all his good judgements will one day result in him getting destroyed, by a former employee, or two, and they will take their damn time while the asset strip and humiliate the POS.
He’s the kind of poster boy that prosecutors love to make their creds on, there is probably quite a few financial crimes he will be liable for, unless he splits for Tel Aviv.
I’m seeing the word “greed” being used in more and more articles and comments. Hmm.
(((neumann))) picked up a billion or so crumbs from a dying civilization. who/whom are the morons?
People will get away with what you let them get away with. I wonder how many employees were buying his bullshit scheme when he promised them a massive IPO? Most likely all of them as they have let him walk away pillaging it a third time. I am no longer blaming any of those cronies for the shit they pull and walk away from without any consequences aside from public outrage.
When investors, which I add are just as bad as that grifter, get called out for their own blind belief in the scheme of easy money I will be surprised. Moreover, the blame wholly falls on the employees and investors and anyone else that thinks this sort of crony capitalism is why socialism gets bought into.
Socialism gets its followers because the followers are too pussified to act on their own and are Stockholmed into thinking the government will exact a punishment on offenders and the government knows best and will always act in the peoples’ best interests. Wish in one hand and shit in the other and see which fills first.
HSF is spot on: Neumann did exactly what the dot coms did, S&L, Enron, subprime lenders and everyone else that has grifted the dumb fucking consumer over the last 200 years. Neumann brilliantly pulled this off and I would love to believe he did it to prove how fucked up the system is, but he did it by accident and no one is the wiser.
A good citizen base would have lynched that piece of shit just like should have been done with the grease ball bankers and politicians enabling them in 2007-08, the dot coms in 99-00, the Enron pieces of shit and all those before and those that come after.
The threat of severe pain and death are a good detractor for people looking to fleece the employees and populace. Too bad we got away from it long ago. People outraged over fucking paper. Lead and gunpowder always have more value than paper lol.
It isn’t waterboarding if we use gasoline. Because then we can light them on fire. Fuck it. I am starting WontWork. Bail me out and pay me out.
Does Simon not know that Neumann *IS* a Bolshevik?
Simon won’t touch the JQ. Neither will Doug Casey, his former employer.
I was once seduced by his hustle years ago. Paid a couple hundred bucks for his “Black Paper” listing the contacts and associates that he had cultivated in Panama for those interested in emigrating from the U.S. and setting business roots or acquiring permanent residency. The guy I selected from his list seemed competent and trustworth at first, but a few years later disappeared when we planned to visit Panama City to inventory our bank account and safe deposit box. The account had been closed. Fortunately we were able to retrieve the contents of the deposit box.
Black ( not his real name btw ) is a West Point grad – late 70’s I believe – and former Army Intelligence officer.
This marks the top, or the end, depending on perspective.
In the future when they do a deep dive on our era, this will be one of the events that historians cannot believe we missed. This is the current Lehman Brothers or Enron. The canaries are dying but everyone is still trying to extract a dime from a nickel and hasn’t noticed.
Neumann is not a moron, and saying so is a distraction. He is a high-IQ, high-energy, highly sociable jew who successfully exploits the goyim – behavior which is entirely moral, even to be encouraged, within the context of talmudic doctrine. If, unlike Bernie Madoff, he has refrained from scamming members of his own tribe, I would not be surprised to see him remain totally unscathed financially, legally, or otherwise for his actions.