Last week, WeWork CEO and co-Founder, Adam Neumann, cashed out $700 million from the We Company ahead of its planned IPO. The move represents a historically dangerous way of thinking, especially because founders typically wait until after going public to sell stock.
While other tech executives have cashed out pre-IPO, Neumann’s cashout stands out for its particularly large number. And venture capitalists aren’t seeing the move in a positive light. David Pakman, a partner at New York-based Venrock, wrote in an email that the cashout is “highly unusual and hard to read as anything but a negative signal about the stock.”
Neumann’s sale of the company’s stock adds to a number of other concerns around him and the company, like the fact that Neumann has acquired real estate and leased it back to WeWork. Furthermore, though WeWork is valued as a tech company it is in fact a collection of properties around the world and many argue that it should be valued as other traditionally assessed peers.
Most worrisome, however, is the fact that should the economy turn down WeWork won’t be able to sustain its business model, particularly considering it lost almost $2 billion last year alone. Neumann’s cashout, combined with the above, doesn’t inspire much confidence in the planned IPO.