WeWork’s Adam Neumann Cashes Out to the Tune of $700M Before IPO Was Held

By: James Maranetta

Adam Neumann just came into a lot of money.

Published reports say that Neumann, who co-founded and serves as chief executive officer of WeWork, the global real estate co-working startup, has cashed out of more than $700 million from his company. And its initial public offering has yet to happen.

The deal is unusual as far as the timing and size of the payouts. They apparently were accomplished through a combination of the sale of stock and loans obtained through Neumann’s equity in his firm. Another oddity is the fact that company founders who opt to liquidate their holdings generally wait until the IPO is done.

Neumann remains WeWork’s largest shareholder, according to The Wall Street Journal, which reported that he has established a family office to invest the proceeds. He has also reportedly hired money managers to handle the transactions.

“He’s also made significant investments in real estate in New York and San Francisco, including four homes in the greater New York metropolitan area, and a $21 million, 13,000-square-foot house in the Bay Area, complete with a guitar-shaped room (I guess a fiddle would be too on the nose),” reported the web site techcrunch.com.

Beyond that, Neumann has invested in commercial real estate of the type his company rents out in order to provide work space with unusually flexible leases. These have included properties in San Jose, Calif. and New York.

Neumann has cashed out more than $700 million from WeWork dating back to 2014 by selling some shares and also borrowing against his remaining stake, according to the WSJ report. “Axios reported that $300 million was in direct sales and another $400 million in loans. Neumann is said to still be the company’s largest shareholder, and he used the loans he took out in part to exercise stock options early and buy more WeWork shares—two facts that may assuage some concerns. But probably not all of them,” said pitchbook.com.

“A founder selling off such a large portion of his stock before an IPO would generally be considered a bad thing,” pitchbook.com added. “It’s largely a matter of aligning incentives, a corollary to the skin in the game that LPs often require from their GPs. Investors typically feel better about a CEO’s motivation to increase a company’s stock price if that CEO owns a large amount of said stock. You make money, I make money, all’s well.”