WeWork founder Adam Neumann. Photo: Jackal Pan/Visual China Group via Getty Images
Sen. Tom Cotton (R-Ark.) last week told CNBC that the WeWork debacle is driving some Americans toward socialism.
The state of play: Cotton's argument is an unintentional critique of American capitalism, at least as codified by legislators like Cotton.
Cotton first raised this line of argument via Twitter in October:
What happened: Neumann did get an insane amount of money from SoftBank, as an effective bribe to effect its rescue package and then relinquish his voting shares and board seat. It was just shy of $200 million. Cotton gets to $1.7 billion by also adding in Neumann's share sale via a SoftBank-backed tender that was available to all WeWork holders, plus a restructure of around $500 million in existing loans.
When it happened: Neumann exited in October. That's the same month that Sanders experienced his lowest average polling of the 2020 presidential race, per the RealClearPolitics average. So perhaps Cotton really meant to cite Elizabeth Warren but, either way, it's hard to argue that their messages only began resonating two months ago.
There continues to be zero evidence that Neumann committed financial fraud at WeWork. Arrogant governance and a surfeit of hubris? Absolutely. But I've spoken to numerous sources, both inside the company and outside advisors, and none of them have found fraud.
- Conventional wisdom among these sources is that WeWork could have successfully gone public had Neumann fixed governance before publicly filing the company's prospectus. Not at a $47 billion valuation — likely at less than half, which Neumann was said at the time to have accepted — but public nonetheless.
The bottom line: Neumann ran afoul of the markets, but not of the law. Suing him would be akin to suing lightly-regulated capitalism. If that's Cotton's true belief, then he might be backing the wrong presidential candidate.