WeWork CEO Profits in Millions as ‘Landlord’ from $47 Billion Startup: Report
According to a report by the Wall Street Journal , co-working service provider WeWork Co. has reportedly been renting spaces in buildings owned by its CEO Adam Neumann. The report noted that the arrangement has already seen the company owner net millions of dollars.
The company model employed by WeWork involves getting office space leases and then subleasing smaller units to startups, individuals and smaller groups of people for various purposes.
The WSJ reports that according to various investors, the arrangement had a bit of a concerning nature as it has the potential of creating a conflict of interest for Neumann, as the CEO could choose to act in self-interest, rather than that of the company.
Neumann reportedly owns half of an 11-story building in New York, which is being used by WeWork as a coworking space. The Journal also reports that Neumann is the majority stakeholder in a group that makes purchases of various properties in San Jose, California. Some of the buildings being owned by the company are also being subleased to WeWork for further subleasing.
However, according to a report by Business Insider, a spokesperson for the company noted that out of the 400 co-working spaces owned by WeWork, Neumann is a stakeholder in just four. In addition to that, the spokesperson confirmed that all activities relating to Neumann’s spaces being leased by WeWork have been disclosed to the company’s investors and approved by its board.
The spokesperson said, “WeWork reportedly has a review process in place before any party transactions are approved. Those transactions are reviewed and approved by the board, and they are disclosed to investors.”
However, it is also noteworthy to add that in a fundraising deal in 2014, Neumann became the company’s largest individual shareholder and got enough equity in the company to exert voting control over its board. Essentially, this means that while the board- which consists largely of independent directors- has a measure of voting power, Neumann has sufficient voting power to force the approval or rejection of a proposal.
In October 2018, SoftBank was considering making an investment in WeWork in the range of $15 billion and $20 billion. However, the Group reportedly reconsidered its plan, opting to forgo purchasing a majority stake in the company. Instead, the Group put in an additional $2 billion, to the $8 billion invested in the past.