By all accounts it’s just a giant cash sucking machine with insane long term debt obligations.
In: Economics
When a CEO leaves a company in a high-publicity fashion, (s)he usually gets a payout that compensates lost income a few years into the future.
Being let go in a fashion that makes other companies refuse to hire you for a similar job again, you typically get a handout that corresponds to several years salary and expected financial income.
The job typically has that risk, which means that the contract typically has a section that regulates this exact type of problem.
It’s outrageous money. Even if we assume that it’s a compensation for ten years loss of pay, it’s still an amazing salary. Even if we imagine that this is a guy who works all the time, has no family life, has to board his kids at a weird school somewhere and never meets his wife because he is constantly travelling, it’s still a high salary.
But. That is what they were willing to pay him. And when he leaves publicly, it’s fitting that they need to upkeep him after. The setup makes perfect sense, even if the amount of money doesn’t.
WeWork’s largest investor, SoftBank, either believes there’s money to be made in the concept without the CEO or just wants to have him gone so they can salvage their reputation by ending this gracefully rather than letting him crash the whole thing in a giant embarrassment to everyone.
Analyst here : WeWork has the HIGHEST valuation of any Real Estate Company on Planet Earth when using normal real estate metrics,
Like $ / PSF etc.
Adam Neumann isn’t just the CEO of WeWork, he’s also the majority owner.
Or *was* the majority owner. The reason he’s getting paid is because SoftBank is buying the company from him. That’s what he’s being paid for – his ownership in the company. His role as CEO has nothing to do with it.
Think about it like this, you both drive and own your car. If you sell the car then you’re no longer it’s driver. But you’re not being paid to stop being the car’s driver, you’re being paid to stop being the car’s owner. It just so happens that the new owner of the car also doesn’t want you driving it.
Adam Neumann’s situation is the same – he used to be the driver (CEO) and owner of WeWork. Now he’s selling WeWork and the new owner doesn’t want him to be the driver (CEO) anymore.
Because he negotiated that in his hiring contract. Alot of big shot CEOs have leverage to negotiate golden parachutes. From a company perspective, it’s a choice of hire big shot and turn the company on a good path, or hire a cheaper lower CEO that has less track record of doing the job.
This is better in r/outoftheloop. Current events are not allowed per Rule 2.
Imagine if the CEO of AirBNB owned 10% of the shares of the company. Someone wants to get him out as CEO and buy his shares. They pay 1.7 billion for his shares. Makes sense? Sure it does.
The issue here is that WeWork doesn’t seem like it is worth anything. It is a commercial leasing company that can’t make money leasing commercial real estate. I don’t know why you would even pay a dollar for that – let alone billions of them. Now you might be thinking “surely they have SOME value… the bank is paying for them”, but these idiots also said the company was work 46 BILLION dollars just a few months ago and now they are saying its worth less than 10 billion. I don’t believe that these banker’s intelligence has changed in the past few months anymore than I believe the value of WeWork has changed in the past few months.
to add to this: the $1.7B payout comes in 3 forms.
SoftBank will pay Neumann up to $970 million for his shares, a $185 million consulting fee and will offer him $500 million in credit to help repay his loans to J.P. Morgan Chase, UBS and Credit Suisse.
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