How WeWork Incentivized CEO Adam Neumann to Take the Company Public: Term Sheet
Now that we’ve all had a chance to digest WeWork’s prospectus, my colleague Lucinda Shen breaks it down even further.
She found an unusual clause that could allow WeWork CEO and founder Adam Neumann to make millions if the company hits a market cap of $90 billion — which would make the firm larger by value than General Electric, which is valued at about $82 billion, CVS Health ($78 billion), and T-Mobile ($76.8 billion).
She reports:
Neumann, who earned no equity awards from the company prior to 2019, could be rewarded with hundreds of millions in equity depending on how shares of We Company trade in the public sphere. Neumann is set to earn 9.4 million so-called profits interests, which entitle the holder to one Class C Common share of the We Company, if WeWork becomes a $90 billion company and maintains that market capitalization for at least 60 days. Neumann is also set to earn an two 7.1 million profits-interests payouts should WeWork attains a valuation of $50 billion and separately $72 billion for at least 60 days each.
The equity came as part of a plan to convince the firm’s leaders to file for an IPO, per the filing. “As the Company grew, our board of directors desired to provide a significant incentive to Adam to conduct an initial public offering, based on the premise that the Company’s value would be maximized as a public entity rather than remaining privately held,” the S-1 filing read.
As such, Neumann will also receive 9.4 million profits interests that vest over a period of five years upon the completion of the offering. Prior to the IPO filing’s reveal, Neumann also posted an IOU to the tune of $362.1 million to the company in order to acquire some 9.4 million stock options, which he later repaid by surrendering shares in the company. WeWork later issued profits interests to Neumann equal to the number of shares he surrendered.
Let’s see if WeWork can keep accelerating and reach this market cap goal. But as Lucinda notes, “In a market that is in the late stages of a bull run and signs of a global slowdown emerging, WeWork is certainly facing an uphill battle.”
NEW SOFTBANK DEAL: SoftBank’s Vision Fund just made its first ever energy storage bet. It will invest $110 million into Energy Vault, a Switzerland-based manufacturer of energy storage and transmission equipment. Bloomberg explains how it works:
An electric crane hoists up blocks of concrete and stacks them into a tower when power is plentiful. When power is needed, it uses gravity to take the structure apart brick by brick. The weight of the descending blocks converts kinetic energy into electricity.
The Vision Fund is betting on the need for more affordable and bigger storage systems to expand the use of renewable power and wean the world off fossil fuels, the story notes. Finding a more inexpensive way to bottle up clean power & dispatch it could be revolutionary.
AN INSTAGRAM-FRIENDLY DEAL: You guys know The Museum of Ice Cream? I despise ice cream (don’t ask), so I’ve never actually been inside, but I hear it’s very flashy, interactive, and of course, Instagram-friendly.
Here’s how it started: Founder Maryellis Bunn was disappointed by a recent visit to Disneyland because the park didn’t “optimize for social engagement.” So Bunn created the ultimate Instagram-optimized space & called it The Museum of Ice Cream. Every wall has a colorful pattern, the lighting is flattering for your selfies, and well, it’s ice-cream themed.
“Advertising is dead. The way in which we are able to have our visitors physically, tangibly, sensually engage with brands has a return on investment that no ad could ever come close to,” she said in this 2017 New York Magazine profile.
As far as I’m aware, The Museum of Ice Cream was the first to kick off this “pop up experience” craze and woo millennials into these experience-infused museum art installation things. Welcome to the next generation of advertising.
But that’s not even the crazy part! Figure8, the parent company behind The Museum of Ice Cream just unveiled $40 million in funding at a $200 million valuation! Elizabeth Street Ventures and Maywic Select Investments co-led the round, and were joined by OCV Partners.
In the profile, the reporter asked Bunn what her ultimate dream was. “I want to be the next Disney,” she said. “I could take all of those different installations that we just went through, and I could build them out into city blocks. It would be my Heaven. Could you imagine?”
Apparently, her investors can.
A NEW HOME DEAL: Flyhomes, a Seattle-based company seeks to streamline the home-buying process for its clients, has raised $141 million in new financing. The capital includes a $21 million Series B round led by early-stage venture capital firm Canvas Ventures, as well as $120 million in debt from lenders including Goldman Sachs-backed Genesis Capital. Read more at Fortune.
100 FASTEST-GROWING COMPANIES: Fortune’s annual list of the Fastest Growing Companies went live this morning. The 2019 ranking of the world’s top three-year performers in revenues, profits, and stock returns provides a snapshot of the trends driving the global economy.
For the second year in a row, the technology sector placed the most companies on the list, matching last year’s total of 32. The once-dominant energy industry, meanwhile, continues to lag. Explore the full list here.