Courtesy of Pam Martens
The WeWork IPO preliminary prospectus was filed last week with the Securities and Exchange Commission (SEC) and the company has been getting savage reviews ever since. WeWork is a commercial real estate company leasing out office space but is attempting to mesmerize the public into believing it is some genius new-age thinker.
JPMorgan Securities LLC, a unit of JPMorgan Chase, and Goldman Sachs & Co. are listed as lead underwriters on the IPO. Scott Galloway, a professor at NYU’s Stern School of Business, wrote on his blog that “bankers (JPM and Goldman) stand to register $122 million in fees flinging feces at retail investors….”
What has not been crystallized as yet, however, is how Jamie Dimon, Chairman and CEO of the largest bank in the U.S., JPMorgan Chase, sits smack in the middle of this mess. Dimon should definitely have seen this mess coming. Dimon was co-CEO of Salomon Smith Barney when it began its super chummy relationship with Bernie Ebbers of WorldCom, which ended in multi-billion dollar legal settlements by Citigroup, Salomon Smith Barney’s parent, and Ebbers serving a 25-year Federal prison sentence.
The WeWork IPO prospectus (the company will officially be called The We Company) uncannily channels the relationship that Salomon Smith Barney (SSB) and Citigroup had with Ebbers. To ostensibly get Worldcom’s investment banking business, Ebbers received lots of favors from SSB and Citigroup. According to a 2003 lawsuit brought by Alan Hevesi, the Comptroller of New York State, SSB and Citigroup had provided $499 million in personal loans to Ebbers, some of it collateralized with Worldcom stock, which meant the bank had a conflicted incentive for the share price to do well and to tout the stock to public investors, even if it meant wearing due diligence blinders.
Compare that set of facts to this language in the WeWork IPO prospectus regarding the underwriters relationship with Adam Neumann, the Chairman and CEO of WeWork:
“UBS AG, Stamford Branch, JPMorgan Chase Bank, N.A. and Credit Suisse AG, New York Branch, affiliates of the underwriters in this offering, have provided a line of credit of up to $500 million to Adam Neumann, of which approximately $380 million principal amount was outstanding as of July 31, 2019. The line of credit is secured under a security and pledge agreement by a pledge of approximately _____shares of our Class B common stock beneficially owned by Adam and held through WE Holdings LLC, of which Adam serves as a managing member. The line of credit has a scheduled maturity of September 18, 2020 and may be extended from time to time at the discretion of the lenders. The lenders have received and will receive customary fees and expense reimbursements in connection with the loan.”
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