We Work’s IPO bears eerie parallels with Worldcom’s Citi-enabled IPO. And we all know how that ended.
By Pam Martens and Russ Martens of Wall Street on Parade
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…