Where it gets really crazy is the fact that Neumann has de-facto dictator status and the company leases a substantial portion of its buildings from him. As best I can tell, Mr. Neumann has basically figured out a way to get Softbank to loan an entity he controls some billions of dollars to lease assets he controls for purposes that have no realistic chance of ever making it into the black.
I assume that this is legal, or they probably would have been cagier about openly writing it out in their S-1; but it stinks to high heaven and makes me wonder why anyone would put up with it.
Even if you think that ‘space-as-a-service’ is totally going to be the Uber of cube farms; I cannot understand why you would refrain from demanding that your giant stacks of cash actually buy you something, like, say, serious voting rights or having the money secured against the assets you are leasing from the CEO-for-life; or both.
We have entered into a number of transactions with related parties, including our significant stockholders, directors and executive officers and other employees. For example, we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest. We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest, such as through ARK (as defined in “Business—Our Organizational Structure—ARK”). See “Certain Relationships and Related Party Transactions”. We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests.
Transactions with a landlord entity in which related parties hold ownership interests present potential for conflicts of interest, as the interests of the landlord entity and its shareholders may not align with the interests of our stockholders with respect to the negotiation of, and certain other matters related to, our lease with that landlord entity. For example, conflicts may arise in connection with decisions regarding the structure and terms of the lease, tenant improvement allowances or termination provisions. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these leases, such as the treatment of events of default.
