WeWork CEO Adam Neumann has a pretty sweet side hustle

It is Friday, January 19, 2019. In case you forgot.
wework for who?

Nice side hustle Neumann

This week the Wall Street Journal published an article indicating that WeWork leases office space from the company’s CEO Adam Neumann. This means that Neumann (whose estimated $4.1 billion net worth is attributed almost entirely to WeWork already) makes millions of dollars per year leasing to his own company.

Hilariously enough, the story first came to light because Neumann was being a bad landlord. IBM, who is currently leasing an office building in New York from WeWork reported issues with the elevators in the building forcing their employees to climb 11 flights of stairs -- welcome to the world of New York landlords Watson.

How does WeWork work?

To understand why this is a big deal, it’s probably a good time to take a look at WeWork’s business model.

WeWork leases office space (sometimes just a few floors, other times an entire building) from the real estate company that owns the space. WeWork comes in and redesigns the office into a coworking space (think shared desks, common areas, call cubes, etc.) WeWork then rents out the coworking space to everyone from solopreneurs to large companies. 

WeWork makes money on a given space by selling memberships that add up to more than what they’re paying the real estate company to lease the space. A key component of WeWork’s ability to make a profit is their ability to negotiate favorable leasing agreements.

Conflicted Investors

Investors in WeWork (which is currently valued at over $40 billion) are concerned about Neumann’s involvement as both a real estate owner and the CEO of WeWork. In theory, this could lead the company to make leasing decisions that would benefit Neumann personally at the cost of the company.

The whole situation is conflict-of-interest-y, especially considering Neumann holds more than 65% of the company’s voting shares -- essentially giving him final say over any corporate decisions.

Japan’s Softbank was considering taking a controlling stake of WeWork for $16 billion but reduced that stake to $2 billion last week (Softbank has already invested $8 billion in the coworking company).
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Zac Cherin
Brendan Uyeshiro
Brendan Uyeshiro