The co-working office space industry has become increasingly more attractive to companies of all sizes in recent years due to flexible lease terms. Companies like WeWork have thrived as businesses have traded in the traditional lease agreement for the opportunity to rent space only for as long as they need it.
Despite the industry’s success and popularity, WeWork Cos. co-founder Adam Neumann has cashed out more than $700 million from the company prior to its initial public offering (IPO) via a combination of stock sales and debt, reports The Wall Street Journal and multiple news outlets. News of Neumann’s transaction comes from people familiar with the matter. The $700 million total is unusually large as startup founders often wait until the IPO to cash in their holdings. Neumann’s decision may not be a surprise to some as the WeWork co-founder has sold some of his stake in the company and borrowed against his holdings in the past, according to sources.
Startup investors typically do not like to see a company’s founder cash out big pieces of their shares before an IPO because it makes people wonder how confident they are in the company. However, sources familiar with the situation believe Neumann has borrowed against his shares because he’s confident in WeWork’s long-term prospects.
WeWork was valued at $47 billion during its last investment round in January, according to The Wall Street Journal. The company initially planned to move forward with its public listing later this year or in early 2020, per people familiar with WeWork’s timing. However, recent reports have stated the co-working space provider is looking to go public in September—much sooner than expected. It’s been speculated that WeWork is moving its IPO date up because company executives are concerned the good times won’t continue given the U.S. stock market is trading at near records. WeWork has yet to publicly state when it will launch the IPO however.
The company has not disclosed Neumann’s exact stake in WeWork, but We Holdings LLC, which he controls, held about 30% of WeWork at the end of 2017, per securities documents tied to a bond sale last year. Those shares comprise 10 times the votes of standard common stock, which give Neumann voting control, according to The Wall Street Journal.