- One of the most draw-dropping transactions revealed in WeWork’s S-1 filing involved a $5.9 million payment made to another company controlled by WeWork’s CEO.
- We paid Neumann’s other company $5.9 million worth of securities in order to own and use the name "We."
- One tech-finance pundit, NYU professor Scott Galloway, has skewered the company over this transaction.
- Read all of BI’s WeWork coverage here.
As we previously reported, WeWork founder Adam Neumann has not only locked up tight control of the company, now known as We, but he has also found myriad ways of extracting millions of dollars from it in stock, cash, loans, and other assets.
One of the most jaw-dropping transactions revealed in the company’s S-1 paperwork filed last week is this: His company paid him millions to own its own name.
More specifically, in July, just before sharing its financials to the public as part of its initial-public-offering process, the company reorganized into what it calls an "UP-C" structure, which renamed the company "We."
When that happened, the newly named We paid Neumann’s private company, called We Holdings LLC, $5.9 million worth of "partnership interests" to acquire the trademark of "We." The S-1 says the value of this trademark was "determined pursuant to a third-party appraisal."
However, the S-1 doesn’t say why the board thought that Neumann’s other company owned the trademark in the first place. After all, the name of his private company, We Holdings, was derived from the name of the original company, WeWork. And it’s not an unrelated entity.
We Holdings acts as a holding company for the class B shares owned by Neumann and his cofounder, Miguel McKelvey.
Those class B shares carry 20 votes per share over the main company, We. That’s a high number of votes, even by Silicon Valley standards, where "super-voting" shares are typically 10 votes per share.
In Neumann’s case, his shares have 20 times the voting power over all others. And it’s worth pointing out that Neumann controls all the votes attached to all the class B shares, even if he doesn’t actually own the shares themselves, the S-1 says in various footnotes.
He also controls all the votes attached to the 20-votes-per-share class C shares, whether or not he owns those shares directly. They are controlled by another related company in this UP-C structure called "We Company Partnership," which, interestingly, also uses "We" in its name.
So it’s not an exaggeration to say that a company controlled by Neumann paid another company controlled by Neumann $5.9 million to use the word "We," which is used by both of them and by others in their family of related companies.
NYU professor Scott Galloway wrote about this $5.9 million transaction in his analysis of the company, which he called "WeWTF," in which he advised straight out: "Don’t buy this stock."
Galloway wrote, "Adam also owned the rights to the ‘We’ trademark, which the firm decided they must own and paid the founder/CEO $5.9 million for the rights. The rights to a name nearly identical to the name of the firm where he’s the founder/CEO and largest shareholder. YOU. CAN’T. MAKE. THIS. S—. UP."
We, the company, declined comment.
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