WeWork cofounder Adam Neumann personally invested $30 million in a startup and loaned money to its CEO. Then the CEO got fired for alleged gross misconduct.

Business Insider Finance 1 month ago

WeWork's scandal-hit founder Adam Neumann invested in a British startup early this year then personally loaned money to its CEO, who was fired months later for alleged gross misconduct.

Neumann initially made a publicly disclosed equity investment of £25 million ($30 million) into UK energy tech company Faraday Grid in January. That investment would eventually be managed through his family office, which looks after his personal wealth. At the time Neumann said of the investment: "Faraday Grid will fundamentally change the way we access and use energy in the future."

Faraday Grid claimed it was working on a new type of transformer, with the aim of boosting grid operators' capacity to handle renewable energy. The company demonstrated a prototype in spring 2019, but had yet to formally launch the system with customers. Its other major investor was AMP, a Canadian clean energy company.

But the relationship with Adam Neumann went further than a standard investment, according to documents obtained by Business Insider and sources with knowledge of the matter.

Neumann separately loaned money to Faraday Grid's UK-based chief executive, Andrew Scobie. That loan would again be managed through his family office, according to the documents seen by Business Insider. Neumann's family office is called 166 2nd Financial Services, named after the New York building where he and his wife Rebekah once lived. The loan, which has not been previously reported, was agreed some time in early 2019.

News of the loan sheds fresh light on the kinds of investments and financial deals struck by Neumann, who stepped down as WeWork's CEO in September after the office-rental company shelved its public float over concerns about its business model, internal culture, and corporate governance.

Neumann has personally invested in a number of startups with his WeWork wealth since 2013, also backing Pins, Feature.fm, Tunity, Selina, EquityBee, InterCure, and Hometalk, according to Crunchbase. Through WeWork, he invested in a wave-pools startup called WaveGarden and a superfood startup called Laird Superfood selling "performance mushrooms" among other things. His family office 166 2nd is run by former General Catalyst investor Ilan Stern.

166 2nd Financial Services declined to comment.

Asked about the loan, Andrew Scobie told Business Insider: "This is a personal matter independent of Faraday Grid, and as such, the terms are confidential."

AMP CEO Dave Rogers said in a statement: "AMP is considering its own legal remedies arising out of the Faraday situation, and therefore won't be commenting at this time, except to say that it is satisfied its nominees on the Faraday board acted prudently and appropriately at all times."

According to the documents, Neumann loaned £90,000 ($110,000) to Andrew Scobie through the family office. The loan follows Andrew Scobie separately borrowing a similar amount directly from Faraday Grid.

The documents and three sources with knowledge of the matter stated that Scobie borrowed money from Faraday Grid to refurbish his house, and detailed further expenditures on antique books, custom suits, and lavish outings at hotels and restaurants using company money. 

According to the documents, the loan from Neumann was intended to pay back this earlier debt but this didn't happen. The documents, dated July, state that Scobie still owed the cash to Neumann's family office. 

It's not clear if Neumann has ever made personal loans to other individuals, or how these may have impacted his personal finances. A spokesperson for the executive did not immediately respond to Business Insider's request for more information.

The loan is comparatively small compared to the $12.8 billion raised by WeWork and the millions borrowed by Adam Neumann. But the initial investment and the subsequent loan will raise further questions about Neumann's financial judgement.

Revelations of the loan will be awkward for Neumann, given that Scobie was fired from Faraday Grid for alleged gross misconduct in June, over the money he borrowed from the company and employee allegations that he swore at staff.

Scobie hired lawyers to challenge his firing but Faraday Grid then collapsed into administration before he could take further action. Administration is the UK's approximate equivalent of bankruptcy. Faraday Grid collapsed in August 2019, on the same day WeWork filed its papers to go public.

Scobie told Business Insider: "This action was in train, and my lawyers felt we had a very strong case, at the time the company was put into administration. As a result, the case was never resolved."

Scobie also acknowledged in emails to Business Insider that he borrowed money from Faraday Grid to refurbish a property, but says this was "approved and encouraged" by the board. He says that he repaid the other expenses.

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