As global office-space sharing and co-working start-up WeWork nears IPO, co-founder and CEO Adam Neumann reportedly sold his shares and took a $700 million loan.
The news comes ahead of WeWork and its parent, valued at $47 billion go in for a heavily anticipated public listing. Co-founder and CEO Adam Neumann gave up sizeable portions of his stake in the company, as per a Wall Street Journal report.
The report also states that Neumann took a loan worth $700 million against his holdings. Neumann bought more shares in his company. The loan is reportedly being used in buying five homes and investing in real estate and startups.
Neumann’s sales and debt transactions amounted to $700 million, where he sold and borrowed hundreds of millions of dollars in transactions involving his shares in the company. This is not new, however.
The founder of the world’s most valued office-sharing company has encashed some of his stake in WeWork in recent years. He has also borrowed money against his holdings. In April, WeWork made a confidential IPO filing, valued at $47 billion in the most recent funding round in January.
As per the report, Neumann performed stock sales during several rounds of financing on some of his stake in WeWork. His current stake in the company was not confirmed by the report. As per the WSJ reporting, Neumann utilized the liquidity to exercise stock options and convert them into more shares in WeWork. Some of the money has also been used to fund five private residences. Neumann has also invested some money in startups.
Not uncommon for founders to cash out
What Adam Neumann did is a common practice among founders and early stakeholders of private companies going public. They cash out some of their stakes during funding rounds, which helps enticing large investors.
But on the other hand, large stake sales from founders just before a company’s IPO is unnerving for potential investors who might see it as a founder’s stirring confidence in the company’s fortunes. This sends mixed signals about the company’s long-term viability on public markets.
But Neumann’s borrowing against stake has sent out a message of confidence to the Wall Street about his trust in the global co-working company’s long-term plans and business model. WeWork has raised funds to the tune of $10 billion since its founding in 2011, in the venture and debt funding.
On paper, WeWork still struggles to justify how it can turn large real estate investments into profits in the long term. Consequently, the move no doubt brings the company’s financial stability and viability under a scanner and up for scrutiny by Wall Street analysts ahead of the public listing.