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Troubles Mount for the We Company as Softbank Reportedly Calls for Shelving IPO (techcrunch.com)
179 points by doppp on Sept 10, 2019 | hide | past | favorite | 163 comments



Corporate governance for startups is such a joke sometimes, it’s unbelievable. And investors bring it upon themselves.

You want sustained hockey stick growth, regardless of the cost to the team and the business, no matter what? Then you’re gonna find some founders that are much better at making the business look promising by hitting certain metrics than actually building a solid operational foundation for the business.


Though this happened at GE too over a long time with a traditional corp gov structure.

I'm blanking on the tech company [1] that recently gave into the pro-traditional corp gov people and gave up their super-voting shares, only for Wall St. to start screwing them and the long-term of the company, which was reported as a blow for the pro-trad corp gov people.

It's a hard call, but I think I'm still for close control by the founders. Sure Elon might've promised too much and pushed Tesla too far, but if they put in a former auto exec I suspect the company wouldn't be as far along as it is.

The SolarCity acquisition OTOH seems like Elon taking a bonus for himself and having the power (via his votes, but also who he is for the company / execution) to make the board go along with it.

I suspect Neumann's investors are in too deep to challenge his craziness (sound like anyone else?) but the market rightly smells bullshit.

[1] I heard about it on Pro Rata the other day.


> And investors bring it upon themselves.

Of course.

Yes you have the occasional bad apple, but so what? You're a VC...you have 10 bad apples for every 1 good one.

The calculus is in favor of pouring gas on a promising bet, even if it increases the risk of explosion.


Buying that stock would be akin to donating to a "Help Adam Neumann Buy Real Estate" GoFundMe campaign.


GoFundWe


WeFunder


Maybe he calls it "WeToMe"?


Or just "Me" for short.


Pixar style animation where the W of We flips on itself and become Me ;)


Quick, register the "Me" trademark and sell it back to them.


He at least had the good sense to "allow" them to use "his" WE trademark without having to pay the $15M annual fee anymore!


Bloomberg mentioned that Neumann probably cost himself tens, if not hundreds, of millions of dollars because of the huge negative impact of that clause, given that most of his wealth is tied up in WeWork stock. And then he ended up cancelling the deal anyways.


Was it an annual fee?

Its seems like it was a 1 off payment of 'only' $5.9 million

https://www.businessinsider.com/wework-ceo-gives-back-millio...


We must be pretty important for Softbank as a signal - even if they didn't believe in the company, allowing such a major investment take such a big hit would be rather bad. Worth them pouring a few $bn more in instead of an IPO, if only to shore up faith in the rest of their portfolio?

All that being said, someone needs to be mentoring the CEO, like right now. That S1 was... not... great.


SoftBank business model: make an investment at valuation X. Make another investment at valuation 2X. Declare that the value of the first investment has doubled!

The wheels come off when anyone else gets to value the investment. That’s happening now. I wonder how other SoftBank businesses like ARM will be impacted.


I wonder how other SoftBank businesses like ARM will be impacted.

I don't think many investors dispute the ~$28b valuation that Softbank paid for ARM.


ARM might be king now, but looking into RiSC-V and the Made In China 2025 initiative, I wonder what the landscape will be like in the future

https://news.ycombinator.com/item?id=20838030


Softbank invested at a $47 billion valuation.

An IPO at $20bn, that may tank afterwards, would really hurt their paper profits.


The risk may be more existential for Softbank than just knocking profits -- coming after Uber


>Worth them pouring a few $bn more in instead of an IPO, if only to shore up faith in the rest of their portfolio?

I'd love to know how throwing good money after bad would shore up the faith in the rest of the portfolio?

"No one else wants this, but we can't afford to mark-to-market, so we're going to throw more money in with the hopes of maintaining an illusory valuation."

At the end of the day, it's a bad business. Can't fake your way out of it.


> I'd love to know how throwing good money after bad would shore up the faith in the rest of the portfolio?

I mean, I'm just throwing something out there - I can't see how they were funded in the first place...

But, there's definitely a scenario where We taking a 50% haircut after several large-scale late rounds led by one prominent fund could lead to other companies valued at a level by the same late stage fund being valued less. The optics of that to other investors, whilst common for a lot of funds, at this late stage could raise some eyebrows.

$3bn to maintain We's valuation on the private market might mitigate against several multi-$bn write downs across the portfolio, especially if they're planning IPOs as well.

No idea if it's a decent strategy, but this is VC we're talking about...


Softbank has over $10 billion of its $100 billion Vision Fund invested in WeWork.

That's a hell of a big bet. It's not hard to imagine Softbank will do whatever it can, rational or not, to try to get WeWork to a point where they can cash out.


Yes. It’s a pretty common conflict of interest between the manager of the fund (which has a strong incentive to raise new fund while they can as quickly as possible so will want to prop up any losers until the current round of fundraising is complete) and the investors in the fund (who may or may not also be invested in the manager itself).


>Softbank will do whatever it can

I agree: they'll do something. But having to pour money into a company that just blew its IPO because the business is terrible...well, not sure the market as a whole can see that as anything else but "we're f-cked!"


Add a little creative accounting and you got Enron on your hands.


Not a fan of "Community adjusted" EBITDA I take it?


They win my respect for their confidence in trying, but they don't win my money!


We're going to look back on this company and say to ourselves "why did we fund a company to sign rental agreements".

I jest, but WeWork is one of those strange entities that's greater than the sum of its parts. If the magic goes or the brand tarnishes a little, then the whole thing goes poof.


> We're going to look back on this company and say to ourselves "why did we fund a company to sign rental agreements".

Because there is just too much dumb money floating around and waiting to be invested after a decade of QE monetary policy. But instead of governments (worldwide) using said dumb money to invest in their future e.g. by building (or even maintaining!) infrastructure, teaching young students, fixing up environmental issues or helping people rebuild their savings/retirement, the money is forced into such "investments".

Next recession is gonna hit hard.


All of the options you listed would result in wealth redistribution. Asset value inflation and collecting rent are how you maintain or increase the wealth/income gap, not giving away your money to make other people’s lives better/productive.


Yes, it'll make investors richer, but they'll end up in a world that nobody likes to live in.


WeWork is offering its customers something of value, that while not unique, was rare. That it has to do largely with changing the normal contracts in their industry doesn’t matter much.

The issue is not with what they are selling it’s with how they are funding it. I think this story says a lot less about We than it does about SoftBank.


Rare? Regus was widespread in this space before WeWork was a twinkle in Adam Neumann's eye.


Is Regus really pin compatible with WeWork? WeWork offers cheap 1-desk offices with Internet/utilities bundled. Last I checked, Regus offered a "1-desk office" that was much more expensive, could fit several people, and didn't include amenities like Internet bundled.

There were online retailers before Amazon, too.


I suspect we may be still defining the actual market. There are definitely some components of the WeWork experience that are a hard sell even in their target market. The noise, lack of privacy, and casual nature for example. It would not be hard for Regus and friends to roll out trial balloons for variations on the theme.

I see WeWork has having a few damning problems that aren't issues of questionable business or accounting practices:

1) Since they're an challenger in a hot real-estate market, they're starting at a price disadvantage to anyone who already has properties. If other brands can copy enough of their magic at 20% less money, watch WeWork disappear from approved-vendor lists.

2) They're pushing for scale in a non-scale business. There's not huge synergies in supply, marketing, or purchasing. The fact they have hundreds of locations doesn't matter for many "I need an office in one specific place" use case. I don't doubt a WeWork of a handful of locations, as a niche product, would be a modest success. But they need that investor-pleasing hockey-stick growth which means "open 500 locations speculatively" and "generate huge debts and close 50% of locations once we figure out what won't perform".


WeWork rents out multi-story buildings packed full of single-desk offices. What "noise" and "lack of privacy" are you referring to? Both Regus and WeWork have hot-desk areas.


> Is Regus really pin compatible with WeWork? WeWork offers cheap 1-desk offices with Internet/utilities bundled. Last I checked, Regus offered a "1-desk office" that was much more expensive, could fit several people, and didn't include amenities like Internet bundled.

Depends on the market. Regus, as far as I know, doesn't put a lot of effort on build-out of the spaces they sublet. They take them pretty much as they are. It certainly wasn't a co-working space, but those weren't rare before WeWork either.

> There were online retailers before Amazon, too.

There certainly were online retailers before Amazon, but people didn't call them "rare" before Amazon.


"Rare" wouldn't be the word I would use, but the offering WeWork had, a few years ago, was unique and very well targeted to people like me: default month-to-month leasing of flexible 1- and 2-desk offices and hot desk spaces, all amenities included, at below-market prices.


1 vendor in a space is rare.


Regus wasn't the only vendor, just the largest one.

Also, I'd call one vendor in a space a monopoly. Rareness is about the ease of finding a vendor.


> WeWork is one of those strange entities that's greater than the sum of its parts

Or it's one of those entities that claimed to be greater than the sum of it's parts often enough that people started to believe.


This was going to be my first short, shame.


if you could get your hands on the stock, which would have been fairly unlikely.


You can create a synthetic short with options, no need to borrow any stock at all.


With so many people wanting to bet against it though, those put options would end up mighty expensive.


That’s the whole point. Shorting at the right time is similar to buying puts while still compatible with your model.


Not only do you have to pick the right price direction, you have to pick the right timing and have it exceed the markets overall expectation. Even with a short of shares you have to manage to find a lender and beat the cost to borrow them.


I'm looking through some other SoftBank investments. My guess is that Brandless, Wag (dog walking), Clutter (moving), and DoorDash are all in similar positions of having raised too much money.


>I'm looking through some other SoftBank investments

Uber as well, although it actually has a solid brand and a useful product. However, the fund is underwater on their investment too, which adds pressure.


Correct.

Brandless even fired their CEO back in March of this year.

Wag founds are off doing a mobility startup, got kicked out as well.


Evidence we are not in a bubble and that markets are mostly sane currently.


Interesting viewpoint. I took this news as confirmation that we are entering a recession and people won’t pay for just garbage and a dream anymore. Euphoria is waning and reality is setting in on the boom bust cycle.


Sure, but from your statement "not in a bubble" could just as easily mean "in the wake of a burst bubble" and "markets are mostly sane currently" could just as easily mean "markets are reacting to a damaging period of insanity".


It could also be evidence that WeWork tried to get away with too much with their S-1. Has there been a company in recent memory whose IPO efforts were dogged with this much baggage?


I came here to post the opposite: cancellation of frothy IPOs is a good sign of a coming downturn, isn't it?


The market currently appears to be saying, “ya know, if we were in a bubble, I might buy your stinky shit. But because we’re not in a bubble, and I have no great FOMO, I’m going to take a pass on your stinky turd of an IPO.”

Another way of looking at it, anyway. I have no insight one way or the other.


That's because WeWork is obviously bad. But what about other, not so obvious bad-bets?


Evidence against?


A bubbly, insane market would jump on this "before it's too late!". What we are seeing here is a market reaction that says "we reject your insane valuation, cut it in half.".


Tangential, but does anyone else find techcrunch UX absolutely dreadful on desktop?


I just prepend `about:reader?url=` to any TechCrunch URL and never have to deal with their dreadful UI


Which browser is that? :)


I assume Firefox.


You assume correctly.


I use uBlock Origin aggressively and I see it as necessary for TechCrunch.


Agreed. Very untidy to my eyes. I'm not a fan of the moving ad bar at the top, or the progress tracker thing either.


So is this company's business just selling baseless promises to investors? If yes, how did they bootstrap this?


You may have answered your own question.


Yeah but I can't just go to an investor and say "we rent out offices" (in a fancy way) "but we're worth billions" and actually get billions... or can I?


Not with that attitude, you can't.


I've got to say I think this is a really bearish sign for Softbank. Softbank is meant to be so big that it can pick winners and buy shares of entire markets so they can own the future returns of all these tech companies. One of the big advantages of Softbank was meant to be that if you have softbank money you are going to win through capital spend and expansion.

But the fact that Softbank can't walk away from We seems to indicate that they actually are a lot more sensitive to the market than they claim to be. It really changes the dynamic if Softbank can't afford to hold all these companies when the next recession comes. You don't want to be a Softbank owned company during that fire sale.


This seems vaguely like a martingale betting system.


It only took 19 years, but we finally have the next pets.com. What will we call this era? Dotcom Bubble II?


except WeWork has absolutely nothing to do with being a tech company


They got invested into by the same investors all the same. It's the only reason why they are being thrown into the mix of "tech companies" and what puts the rest of the tech bubble in trouble. SoftBank themselves are a hilarious joke. Over half of corporate debt in Japan....is held by SoftBank.


Exactly. Neither did pets.com.


Which for some reason finally matters.


It's so sad to see it all happening, after we all have been celebrating their success ...


I think at this point it would be surprising if there was GOOD news about We! It just seems to be one thing after another.


well this is good news?


I know most HN readers look down upon the site, but I really like Zero Hedge's take on this.

https://www.zerohedge.com/news/2019-09-09/2-letters-20-billi...

> Super-voting stock – Zuck did that and it worked out in the end

> Accelerating losses – Look at all that revenue growth

> Zero possibility of profits – Hasn’t mattered for years

> Convoluted insider dealings on property leases – Property GPs always double dip somehow

> Sold the pronoun “WE” to the company – That man is a crook!!


Maybe Adam should expand his ventures to the business of overhyped music festivals for the tech crowd, they could call it WeBurn or something.

Not that anything like that ever had major problems

But on the topic, ZH is good some 20% of the time, the other 80% is just packaged talking points on "long big recession" (I mean that's actually the motto they follow), EUphobia and some amount of Russianphilia


Zerohedge is entertaining, I always look for the sources in the articles I find interesting, so I can sometimes just read those instead or cite those.

ZH's formulaic way of writing sensational bearish pieces gets a little tiresome after you notice it (posted submitted by guest readers like this one don't follow this format):

Intro about main point

Background on main point

Quote from the source about the main point, repeating the background section but in italics

Controversial next point, with a bolded section

Quote from the source about the controversial next point, repeating the exact prior section, but in italics

Tweets

Two line conclusion, with a finance pun.

I try to just read Bloomberg or Wall Street Journal directly. But Zerohedge's decade long bear market porn is so entertaining.

They used to have credit market specialists writing, but it seems they don't stick around for long.


ZeroHedge is the type of site that will quickly be labelled alt-right, fake news etc. in reality they tend to just interpret events in much more extreme ways but still rely on largely factual sources. I find the commentary to be much more thought provoking than consensus outlets. Glad to see some fellow HN'ers peruse the site.


A lot of the best folks on that site left a very long time ago. If you took ZH's advice/message over the last 5-10 years, you would have missed one of the greatest bull markets we have had and put your life savings into gold.

They shilled hard for Putin/Russia. The articles/comment section was a propaganda piece for the Kremlin. It forced a lot of good people with something interesting to say, to leave.


Quite right, like this [1] 100% factual not at all bullshit scientifically sound article on climate change. Thought provoking indeed.

[1]https://www.zerohedge.com/news/2019-09-05/5-surprising-scien...


..? I’m not seeing anything on that page that isn’t based on “facts”, and none of it seems obviously incorrect..


It says co2 doesn't impact temperature:

"While most of the current climatologists who collaborate with the United Nations believe anthropogenic CO2 emissions have exacerbated natural warming in recent decades, there is no empirical proof to support their claim. The only way to test it would be to wait and see if their assumptions come true.

The entire climate fraternity was in for a surprise when global temperature between 2000 and 2016 failed to rise as anticipated by the climate alarmists. The scientists assumed that rising CO2 emissions from human activity would result in a rapid rise in temperature, but they didn’t.

This proved that atmospheric CO2 concentrations are not the primary factor controlling global temperature. Consideration of a much longer period (10,000 or more years) suggests that CO2 had no significant role to play in temperature increases. CO2 never was the temperature control knob."


At that's patently false? Reading through the supporting material it seems like a pretty good point - CO2 follows, not drives temperature.

https://cornwallalliance.org/2012/12/carbon-dioxide-and-air-...


That's from the article. The author of that post has had virtually all of his work funded by the oil industry.

That doesn't make him wrong, but it does raise questions. There are also few who agree with his stance.

https://www.usatoday.com/story/news/2015/02/26/uds-david-leg...

Fully examining arguments against Legates would be a lot of work, but here's a discussion of his most recent paper.

https://www.theguardian.com/environment/climate-consensus-97...


That has virtually nothing about his claims, just his funding. And while the source of funding is important, I'd love to see an analysis of the actual claims/science.


Oops, my mistake. I meant to link two articles, left off the second. This is the one I was referring to with my final para. Will edit my comment above if I can

https://www.theguardian.com/environment/climate-consensus-97...


Many thanks :)


The thing with ZeroHedge is that you will see an article like this alongside another one like this: https://www.zerohedge.com/health/temperatures-pacific-ocean-...

It is in aggregate an extreme blog with narratives that are non-consensus. So, yes, climate denial fits in that box, but it will also have articles on climate apocalypse. In aggregate I find it to be fairly eye-opening and bring to light ideas that are forgotten by mainstream media. It also has a healthy disregard for any form of consensus reality or authority.

Furthermore, in the very article you linked there is a link to a NATURE commentary: https://www.nature.com/articles/nclimate2938.epdf

Of course, we should leave it to experts to interpret a scientific paper such as this one, but my perception is that reporters do not always get it right. In all of the NYTimes you just hear the consensus from organizations such as the UN, I have yet to see an interview with an author of a paper such as the one mentioned above.


Ironically this seems a good case of gelman amnesia. If you think he's wrong on climate (a MAJOR thing to be wrong about), why would you trust his opinion on subjects where you know less?

------

I didn't link the article, I just reply to the comment asking what was wrong. But he's very much wrong and that nature article doesn't support him. He said CO2 did not lead to a rise in temperature. That article says there was a lower than expected rise in temperature - it's still rose!

He said co2 has no significant impact on temperature which is definitely not what that paper is saying. They refer to co2 as anthropogenic forcing.

Full text is here: http://www.meteo.psu.edu/holocene/public_html/Mann/articles/...


Right, that's the sort of bullshit that media has always pulled.

Give equal time to both sides, even when one side is blatantly full of shit. It's ridiculous.


The main thrust there is that CO2 is not the primary motivator, but instead something else is; which they provide some supporting links for (which I haven’t bothered to review).

And that CO2 not being “proven” as the primary motivator due to lack of testing is also trivially true — we only have the one earth to test on, so we test on models; and our understanding of earth is hardly complete, and so too must be our model.

The conclusions may be “wrong” but at least that article is hardly making things up as they go along


ZH does have a lot of conspiracy type articles that directly state that major world changing events aren't really and that we are being lied to about them which makes me question how much they of what they produce is based on facts and how much is based on their conspiratorial way of thinking. It makes it hard to trust what they are saying sometimes.


> Polar Bears and Other Species Are Not Dying But Flourishing

Lets base it on reports of a couple of big name species and declare everything is fine. Facts!

if you read zerohedge you have long since decided that facts do not at all matter to you.


Does it make a claim that everything is fine? I find it curious how remarking that polar bears aren’t dying out should mean that there’s not lots of other species in trouble, not to mention tons of other things that have problems. Despite polar bears improving.


Reminds me of Yahoo during the first dotcom bubble.

Every commentator/speculator was drooling at the possibility of "boring" Yahoo going bust, despite Yahoo being the most sound business in the dotcom space, and ignoring walking warning signs like Pets.com.


3 and 4 are certainly false; whilst 1 and 2 are true, the end result of any change to the status quo of our environment (ie sea levels) is that society simply can’t afford a 7-70m rise in sea levels. Whether or not you ‘believe’ and this isn’t a religious perspective, this should be well accepted science by now, is that we are causing a change we can’t affoed; and even if we aren’t causing it, it looks like ‘factor x’ is, and we as a civilisation should do all we can to avoid it


4 could easily be true also. If I am a Polar Bear hunter but I can't travel so far in search of my quarry because the ice is melting and can't support the weight of my snowmobile then bear numbers could indeed rise. Whether they continue to rise as temperatures increase is anyone's guess.

In the end it matters little if the planet is warming from natural or man-made causes. If the environment is sufficiently degraded that things start to come apart then everything is in trouble.


After reading the Zerohedge blog for sometime now, I trained myself to spend time on posts Authored by Tyler Durden and avoid posts Authored by affiliated sites. In general you get some value when you read posts directly authored by Tyler Durden.


[flagged]


That ZeroHedge's article on climate change is the perfect shit sandwich of unrelated facts for someone with confirmation bias. It conveniently ignores the atmospheric carbon dioxide which has reached unprecedented levels. Levels that are clearly man made. https://climate.nasa.gov/evidence/

I honestly expected better from you.


11 years or we miss the stated target. A target the IPCC has assessed as important for preserving a manageable and comfortable way of life as we know it. Not 11 years and game over scrolls up the screen.

Al Gore didn't say we would be underwater by now either.


It's 11-12 years to try and slow things down enough. That's not exactly the same but it could end up effectively the same.

> It seems like anything even remotely threatening the climate change gospel is treated just as the Catholic Church treated heretics centuries ago.

Except one side is based on broad scientific consensus and the other is based on your precious GEOTUS and corporate cronies who would rather see the human race dead than any threat to profits.


> Literally, global warming activists, including presidential candidate Elizabeth Warren, are saying we have 11 years or less left of Earth,

They literally are not, conservatives & CC deniers like you just keep parroting this misrepresentation for the purposes of easy dismissal. The 11-12 years is a time period for REDUCING EMISSIONS to keep warming UNDER A CERTAIN LEVEL. but of course you know this and are simply lying about it.


We've banned this account for repeatedly violating the site guidelines, alas quite egregiously.

If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.

https://news.ycombinator.com/newsguidelines.html


Indeed nothing particularly controversial there and nothing that says that warming on a global scale is not happening.

Take the point that climates have always changed. Most definitely. However the concern has always been the rate at which warming is occurring. Given that humans and agriculture have fragmented the natural habitat and hence the ranges of species, the primary concern is the ability of species to adapt. I know that's too subtle a point for mainstream media to digest but it's pretty fundamental in describing the problem. For example, if you are a Brown Bear in northern Spain or the Pyrenees there's nowhere to go.

You could do the same for the other points. All verifiable. It's only once you start adding the consequences that things start to look a little problematic.


I've been reading zerohedge since 2008. I've not really liked the turn it took around 2015-2016 but it seems to have come back around and become a bit more balanced than it was in those early days of flirting with being a full on MAGA blog. It's, IMO, the best financial blog out there.


The problem I have with ZH is that it's always pessimistic, regardless of whether or not pessimism is warranted or logical.


Indeed, but that's a constant / predictable bias the you can easily correct for.


I fail to see how this company could survive a recession. The first thing companies do during a recession is reduce their headcount. Less headcount means less desks required.


Many of their competitors have survived recessions just fine. You just have to either be diversified or have enough cash reserves. The issue is mostly that WeWork has too high costs and a too high valuation.


Their competitors have long term leases with the tenants that we doesn’t have.


Their competitors were profitable before the recession...


What is insane is that they are the biggest commercial real estate tenant in some of the biggest cities in America (and London).


This is my biggest concern. Regardless of if WeWork can 'survive' a recession, my fear is that they could easily cause a recession. If WeWork starts to go under, it could cause a real estate market collapse in some of the world's largest cities.


I wonder which REITs have the most we exposure?


Yes, it's a highly levered play on the mostly cyclical portion of a cyclical market.


It’s been quite hilarious for me watching this saga unfold. All I needed to hear was that this man literally took out loans from WeWork and used the proceeds of the loans to purchase real estate that he then leased back to WeWork. Lol!


And sold the rights to 'We' for like $5mil in stock...to the company he founded. Matt Levine has had a great time ripping him apart for this.


Matt Levine once (or twice..) ripped me apart :(


Maybe don't commit securities fraud


I wouldn't recommend it to the average person. It worked out a lot better for me than most would expect.


Link?



Wow, you're the guy who ran the fake tender offer for Fitbit, made $3k, and went to prison?

Ouch. :)


Well, most of that is accurate.

Also forfeiture doesn't account for the fact that you may have paid capital gains tax. I feel like they really shafted me on that one.


Did you actually serve the full two years? That would've had you getting out pretty recently.


Federal sentences are able to be reduced to 85% with good time. It is also possible to participate in a residential drug treatment program to get up to 12 months off of your sentence. Additionally, they typically send you to a privately operated halfway house near the end of your sentence. Halfway house time can vary widely. Participation in the residential program guarantees you at least 4 months in a halfway house. While at the halfway house you can go out into the community socially, for work, and to live at home for up to 48 continuous hours. From the halfway house you are also capable of being placed on full time home confinement. You become eligible when you have 10% of your sentence left. Occasionally more well-known types, such as politicians, are sent to home confinement earlier. This is supposedly because of "security issues" at the halfway house.

I was sentenced in March of 2018 and self-surrendered at FCI Morgantown on May of 2018. I participated in the residential program and left in May of 2019. I am fully released in October of 2019. I currently live at the halfway house. You need an ankle monitor to go on home confinement and my place of employment is not compatible with an ankle monitor. Unfortunately, the BOP requires you to pay 25% of your gross income to the halfway house while you reside there.

Edit: I can't edit my original comment. I'd also like to add that Matt Levine's wife works at the Federal Defenders of NY office.


He mentioned me again today. Sept 16 2019


Genuine question: is that legal? That seems incredibly shady.


Imagine you are a bank or investment firm or hedge fund or VC. You want to do business with person A, I shall call them “Alice.”

Alice says to you, right up front, “I need to make one billion dollars, or I look for a different partner.”

Are you going to accuse Alice of being greedy, when your entire business consists of making money? You don’t cure the sick, or bring the Internet to rural communities, or manufacture safe transportation, or serve healthy food. You just make money.

So you say, “Fine, Alice, but a billion dollars is a lot of money.” Alice says, “How much do you need to make, such that my dream can come true?”

So you work out how you can make ten billion, while Alice makes one billion.

Now the conversation becomes, “How does Alice take her one billion out of the business, tweaking the knobs for risk, tax advantage, estate planning, and so forth?”

You bought into Alice making a billion dollars, so everything else is just details about when she gets the various bits of her billion.


Sure, but it makes a difference whether that billion comes from returns on productive investment, or from the actual investor money itself. One of those makes you Warren Buffet, the other makes you Bernie Madoff.


I don't think this is so much about Alice's billion dollars as Bob coming up with a way of coining it before Alice...

...but it's hard to care.

(i.e. the 'great' thing about this is that it makes being the founder completely risk-free, you make millions even if your firm craters)


I don't understand what the point is here besides a vague loathing of the financial industry...


What loathing? Finance serves an important purpose.

But its purpose is NOT to police self-dealing. And the people putting the money in are exactly the people who are directly responsible for governance.

Likewise, due to regulatory capture, the people who put money into businesses are closely related to the people who write laws about what is or isn’t legal, and enforce those laws.

So if Adam’s choices are ok with his investors, they are going to be structured in such a way that they are perfectly legal.

The bottom line:

If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing?

Why do we, for that matter?

What crime is being committed, if everything is disclosed? What puritanical streak runs through us that we object to his leasing his own buildings back to his business on moral grounds?

Either he follows through and makes his investors rich, or he doesn’t. I have opinions about that, but at the end of the day, that is all that matters to his financiers, which is why he so-called “got away with it.”

And the things that were unwound were only unwound because they impacted the likelihood of his investors making money. It had nothing to do with crimes being committed or moral turpitude.

What you mistake for loathing is actually me putting money in black and white. Money is neutral. It’s not good, it’s not evil. What people do or don’t do to make it is good or evil. What people do with it is good or evil.

Leasing your trademarks to an entity you own? That’s just shuffling money around. It’s not evil and not a crime. It may affect somebody’s calculations about whether they want to buy a stock, but that’s exactly what the S-1 is for.


> If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing? Why do we, for that matter?

There’s one aspect of some sort of ethical wrongness because I suspect there’s an eventual chump who will lose out not having full perspective when this thing falls apart.

But, for me, I have a tendency to feel uncomfortable when things are “obviously” wrong. I find it curious about me, and I’ve met others, who just don’t like it when things are off. The simple act of making the world more correct is pleasing. I’ve found it pretty helpful in debugging and system design. I find it really annoying in domains where there isn’t really an objective right and wrong, or it’s not clear to me what’s right, or where they aren’t fixable. And it’s pretty common in politics or religion where people point out wrongs.

So I don’t think money or technology is neutral. I think they both as information have certain innate needs to grow in the most efficient way possible. Money is like a river trying to flow to the ocean and actions like We took and is taking are the equivalent of trying to build a harbor in shallow water or some other illogical act.


Ah, well, I think it's certainly valid to take a CEO's behaviour as a signal you use to make predictions about their future behaviour.

And I think it's valid to use that to make predictions about the company's viability and/or make predictions about the likely outcome of any private or public stock market investment.

Choosing whether to do business with someone who fully discloses their past choices and is truthful about their future plans is a whole different thing from judging whether their past choices are criminal and/or dishonest.

Unless it is revealed that they are withholding other relevant transactions, I'd say the man is honest. But "honest" is not synonymous with, "someone I want to do business with."


I like the way you put that. Honesty is not the sole quality that determines whether I want to do business with someone. It’s a good quality, but sometimes not the most important. I don’t even think it’s in the “necessary but not sufficient” category as there are some good zero trust relationships.


> If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing?

On the other hand, why would anyone care whether or not his investors make their “ten billion”?

We object because it’s a you-scratch-our-back-we-scratch-yours situation in which the rich get richer and no value is produced for the rest of society.


Well, that is certainly a valid position to take, and I am not unsympathetic.

But my parent comment was responding to the question of whether this specific behaviour is illegal. Your take touches on whether the entire industry—with or without a few leasebacks and trademark deals—is morally repugnant.


Fair enough. I also think there’s some pattern matching going on, since shuffling money around like this is often indicative of something illegal. But you’re right, this particular case seems to be in the clear.


> Finance serves an important purpose.

Does it?


Maybe you should tell Alice to work for her billion instead of running scams and treating the company like a piggy bank.

Maybe we should just not have anyone worth a billion dollars.


You don't have to be "worth" a billion dollars to destroy a billion dollars worth of stuff. So eliminating billionaires doesn't solve the problem of people screwing up large things. You'd have to eliminate those large things, but that would mean a vastly poorer society.


Look up what Eddie Lampert did with Sears. As far as I know, no criminal issues with his self dealing.


Elon Musk is being sued by Tesla shareholders as we speak, for the same sort of self-dealing with regards to the SolarCity purchase.


Sure. Lampart faced some civil suits as well. Just noting no criminal liability thus far.


> is that legal?

Probably. Investors were amply aware of Adam’s self dealing. It was abundantly disclosed, and they accepted it as part of their investment.

Their wager was the self dealing was a fair cost to pay for WeWork’s growth. They didn’t count on public equity investors being a savvy bunch.

There will almost certainly be lawsuits, but the only moves that look like they crossed clear lines one can’t disclose oneself out of were those involving his hiring his family members. But again, probably a civil dispute by someone turned down for a promotion or similar job.


It depends on what you mean by legal. It seems like fraud to me. However a prosecutor would have it charge him and win in court to get a conviction.


I don't think they go public until they sort out the financials and get rid of the stench of blatant corruption.


Not sure how much one can trust a site that thinks nuclear weapons aren't real.

https://www.zerohedge.com/news/2016-08-06/atom-bomb-annivers...

"The attacks on Hiroshima and Nagasaki were horrible and tragic. But whether they were results of “atom” bombs (certainly in the sense that people understand them today) is at least seriously questionable."


We detached this subthread from https://news.ycombinator.com/item?id=20926837 and marked it off-topic.


While it is your call to make and I respect that I posted it because it does help demonstrate that the source of this article is prone to conspiracy thinking and doesn't always do the necessary research to support their conclusions.


I like the random numerology, really adds weight to the argument:

>We’ve reported that a squadron of 66 bombers were launched on August 6th (666) to bomb the municipality of Imabari, even though Imabari. had been bombed already, twice.

>This bombing squadron may well have fire-bombed Hiroshima instead, as Hiroshima was not far away.

According to early surviving versions of Revelations, the number of the beast is actually 616 - https://web.archive.org/web/20080110172555/http://news.natio... - however this revelation doesn't appear to have filtered through to the conspiratoraly minded as of yet.


666 is Gematria numerology applied to Nero’s name in Greek, 616 is what you get with the Latin spelling, it’s more of a confirmation than a contradiction


Given Nero was Roman, his name will presumably be from the Latin. If the Greek version of the spelling differs, then 666 surely must be in error.

Unless they meant that the number of the beast is Nero's name when you attempt to write it in Greek, though that seems something of a stretch, even for numerology afficionados.


Here’s a source that gets into it, the numerology is calculated out of Hebrew transliteration so there’s some creativity involved in both cases, but while Nero would write his name in Latin, the writers of the New Testament used Greek

> It only is when the words are transliterated from Greek into Hebrew and then calculated that the numeration adds up to 666 (nrwn qsr, 50 + 200 + 6 + 50 + 100 + 60 + 200). Even so, this is an alternate spelling, a letter being transliterated in "Neron" (nrwn instead of nrw) but not in "Caesar" (qsr instead of qysr)

> If the Latin (rather than the Greek) spelling "Nero Caesar" is transliterated into Hebrew (nrw qsr), the final "n" in Neron being omitted (and its corresponding value of 50), the name computes as 616, which is the number indicated in the oldest surviving copy of the New Testament

http://penelope.uchicago.edu/~grout/encyclopaedia_romana/gla...


Wow, that's a disturbing read. Thanks for posting.


fun times ahead




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