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How Adam Neumann walked away a winner

WeWork’s Adam Neumann (Credit: Fortune)

Adam Neumann sold $361 million worth of shares when SoftBank first invested in the company in 2017, according to the Telegraph. WeWork’s first major investor, Benchmark, also cashed out of $315.5 million in shares at the time, and apparently sold more to SoftBank in 2019.

  • Worth Noting: To be more precise, the shares were sold by an Adam Neumann-controlled entity in which co-founder Miguel McKelvey also owns shares. McKelvey has managed to benefit like Neumann and bear no responsibility as he’s still employed by the co-working giant.
  • Why it matters: The size of the sell-offs means that WeWork’s two biggest shareholders before SoftBank came on the scenes, accounted for almost a third of the $2.3 billion of shares the Japanese Conglomerate purchased from insiders before the company aborted its failed IPO last year. The sheer incompetence and naïveté of Masayoshi Son is startling, while the hubris and recklessness of ousted CEO Adam Neumaan will be studied in business schools for years to come.
  • Arrangements meant to disappoint: Other high-profile startups like Zynga, Groupon, and Blue Apron saw their founders sell a larger number of shares before they went public. In each of those cases, the companies’ IPO prices were lower. Such signaling from the largest shareholders should provide ample due diligence for Venture Capital firms. Investors should learn their lesson from the past – these arrangements misalign objectives.

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