WeWork founder Adam Neumann has sold shares and taken out loans against his equity stake in the multibillion-dollar property company, raising at least $700m for himself in recent years as the group moved towards an initial public offering, according to people briefed on the matter.

News of the sales comes after early investors in the company — including Fidelity — sold shares and marked down the price at which they value their stakes in WeWork, which earned a $47bn price tag following an investment from the Japanese technology and telecoms group SoftBank in January.

The size of Mr Neumann’s stake in the shared office space provider after the share sales could not be determined, but at the end of 2017 he held a majority of WeWork’s voting stock, according to a prospectus for the company’s 2018 bond sale.

The share sales, first reported by The Wall Street Journal, could raise questions from potential investors in WeWork’s planned flotation, which was expected either late this year or early in 2020, according to people with knowledge of the matter.

In May the company sought to resolve a conflict before the flotation by agreeing to set up a subsidiary that would buy Mr Neumann’s stakes in buildings where WeWork was a tenant. 

Mr Neumann told the Financial Times in May that he did not plan to diversify his wealth broadly beyond WeWork. He added that he did not participate in a tender offer earlier this year when SoftBank — the company’s biggest backer — bought back $1bn worth of We Work stock from its investors and employees.

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“This company is so early. I want to give it a second and really see it start maturing into the beginning of its potential,” he said at the time, “and I think our peers and investors would be wise to do the same.”

The WeWork co-founder’s share sales and loans were made before the company formally began work on its IPO earlier this year, one person close to Mr Neumann said. The cash raised has been used to help fund a family office as well as investments in other ventures.

“The founders of unicorns (privately held companies with a valuation of $1bn or more) are always trying to manage their liquidity well ahead of an IPO,” said a San Francisco-based banker at a bulge-bracket firm who asked not to be identified. “They use secondary markets to achieve that well ahead of an IPO.”

The banker added: “You don’t want to find yourself in a position to sell just after the IPO. That would send a bad signal to the market.”

WeWork confidentially filed paperwork with US securities regulators for an IPO late last year, at a time when other large venture-backed companies were gearing up for their public market debuts. 

Two of the companies that investors have compared to WeWork — the lossmaking ride hailing apps Uber and Lyft — both stumbled in their listings, raising concerns for WeWork investors waiting to cash out their shares.

To help buttress its looming debut, WeWork has been working with banks to raise as much as $4bn in debt, according to a person familiar with the matter. The company would be able to use the money to fund expansion and cope with an economic downturn.

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WeWork has racked up a significant deficit since its founding in a building in New York’s SoHo district. The group has sustained more than $3.5bn of losses since 2016 as it has opened hundreds of offices in more than 30 countries.

The co-working space provider had hoped to clinch a $16bn investment round from SoftBank earlier this year, a deal that would have included $10bn to buy out early investors. But the deal fell apart after the two sides could not agree on a valuation for WeWork. SoftBank ultimately invested a smaller sum.



Via Financial Times