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Question for 'Big Business' experts

Question for 'Big Business' experts

Old Oct 22nd 2019, 4:56 pm
  #1  
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Default Question for 'Big Business' experts

WeWork boss to walk away with $1.7bn after SoftBank rescue deal
According to The Wall Street Journal, SoftBank will give Neumann almost $1.7bn as part of the deal – $1bn from the sale of his shares plus a $185m consultancy fee and a $500m line of credit.
Why does someone coming into $1.185b - that's billion, not the pocket change million - need access to a line of credit?
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Old Oct 22nd 2019, 5:03 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
WeWork boss to walk away with $1.7bn after SoftBank rescue deal

Why does someone coming into $1.185b - that's billion, not the pocket change million - need access to a line of credit?
If you enrolled in Bidness 101 at your local community college you might get a worthwhile answer.
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Old Oct 22nd 2019, 8:27 pm
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Default Re: Question for 'Big Business' experts

Rich people like to lose other peoples money....


Originally Posted by BristolUK View Post
WeWork boss to walk away with $1.7bn after SoftBank rescue deal

Why does someone coming into $1.185b - that's billion, not the pocket change million - need access to a line of credit?
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Old Oct 23rd 2019, 1:41 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
WeWork boss to walk away with $1.7bn after SoftBank rescue deal

Why does someone coming into $1.185b - that's billion, not the pocket change million - need access to a line of credit?
Tax avoidance as part of the overall package - doubtless he will want to start another business.
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Old Oct 23rd 2019, 1:55 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by dc koop View Post
If you enrolled in Bidness 101 at your local community college you might get a worthwhile answer.
Pointlessly aggressive and rude. Go back to bed.

Originally Posted by Jsmth321 View Post
Rich people like to lose other peoples money....
Yes.

Originally Posted by Cape Blue View Post
Tax avoidance as part of the overall package - doubtless he will want to start another business.
Spot on.
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Old Oct 23rd 2019, 3:56 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by Cape Blue View Post
Tax avoidance as part of the overall package - doubtless he will want to start another business.
Can you explain further please?

If he's starting a new business and uses the line of credit, there will be interest. Does that get written off or something?

If he doesn't want to start another business is he still going to take the line of credit?

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Old Oct 23rd 2019, 5:49 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
Can you explain further please?

If he's starting a new business and uses the line of credit, there will be interest. Does that get written off or something?

If he doesn't want to start another business is he still going to take the line of credit?
Rather than just getting another $200-$300K in cash that he'll have to pay a chunk of capital gains tax, he negotiated a $500K line of credit - likely with a very generous set of terms on interest/duration.

If we assume his $200K attracted a 20% CGT he would pocket $160K towards starting another venture, here he gets $500K towards the start up which gives him a far quicker potential expansion.

I guess he might take the line of credit and never pay it back - which seemed to be a tax-dodge used in the UK for a while.
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Old Oct 23rd 2019, 6:55 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by Cape Blue View Post
Rather than just getting another $200-$300K in cash that he'll have to pay a chunk of capital gains tax, he negotiated a $500K line of credit - likely with a very generous set of terms on interest/duration.

If we assume his $200K attracted a 20% CGT he would pocket $160K towards starting another venture, here he gets $500K towards the start up which gives him a far quicker potential expansion.

I guess he might take the line of credit and never pay it back - which seemed to be a tax-dodge used in the UK for a while.
Okay, thanks, I get the gist of that, although what he got share wise seems way in excess of what the loan would achieve.
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Old Oct 24th 2019, 6:41 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
Can you explain further please?

If he's starting a new business and uses the line of credit, there will be interest. Does that get written off or something?

If he doesn't want to start another business is he still going to take the line of credit?
Depends on the terms of the credit line, but as with any credit line it's debt and must be repaid. It's probably secured against his assets/cash so it's unlikely that he can walk away from it. As the majority shareholder this is something (flexibility as Cape said) that he would have negotiated in order to accept a lower cash payout on his shareholding. Interest isn't written off but as a business expense it does reduce taxable income.
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Old Oct 25th 2019, 12:04 am
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Default Re: Question for 'Big Business' experts

Originally Posted by Shard View Post
...Interest isn't written off but as a business expense it does reduce taxable income.
Yeah that was what I meant by written off or something.
It reduces tax income but doesn't reduce tax payments, so there is still a cost*** to the borrowing from the LOC. Unless there's some other write off. I read about forgivable loans over here that appear not to need repayment. Why the hell do they call it a loan then? Maybe it becomes forgivable/non repayable.

***It's similar to charitable donations. People get a bit cynical about it and talk about it being tax deductible but it just reduces tax by a fraction of the donation. If your tax rate is 25% and you make a charitable contribution of 1000 you're still spending 750 that you needn't have I believe.
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Old Oct 25th 2019, 12:22 am
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
Yeah that was what I meant by written off or something.
It reduces tax income but doesn't reduce tax payments, so there is still a cost*** to the borrowing from the LOC. Unless there's some other write off. I read about forgivable loans over here that appear not to need repayment. Why the hell do they call it a loan then? Maybe it becomes forgivable/non repayable.

***It's similar to charitable donations. People get a bit cynical about it and talk about it being tax deductible but it just reduces tax by a fraction of the donation. If your tax rate is 25% and you make a charitable contribution of 1000 you're still spending 750 that you needn't have I believe.
No idea on forgiveable loans. Who is the lender? Not a commercial entity presumably. Obviously some loans are written off when there is no prospect of repayment/recovery.

​​​​​​Charitable donations might be used to carry tax losses forward in higher income years. Its a complex area, and situation specific, hence tax specialists and lawyers.

The We Work story is a spectacular case of new economy hype and hubris. Now the focus is shifting to SoftBank which was its main investor.

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Old Oct 25th 2019, 12:27 am
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Default Re: Question for 'Big Business' experts

Originally Posted by Shard View Post
No idea on forgiveable loans. Who is the lender? Not a commercial entity presumably. Obviously some loans are written off when there is no prospect of repayment/recovery.
Googling suggests they don't have to be repaid while certain conditions remain met and then do if the conditions are no longer met. When I've seen mention of them it's always seemed they don't have to be repaid full stop. But maybe I just got that wrong.

Loaned by government or organisations set up by gov.
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Old Oct 25th 2019, 12:40 am
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Default Re: Question for 'Big Business' experts

Originally Posted by BristolUK View Post
Googling suggests they don't have to be repaid while certain conditions remain met and then do if the conditions are no longer met. When I've seen mention of them it's always seemed they don't have to be repaid full stop. But maybe I just got that wrong.

Loaned by government or organisations set up by gov.
Well yes, UK government now using such loans to finance university students. Kind of a means tested grant.
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Old Oct 25th 2019, 12:59 am
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Default Re: Question for 'Big Business' experts

Sometimes governments use those type of incentives to get certain professions to relocate to areas of need. I don't know if BC still does it, but if a nurse moved to certain regions for each year they worked in said region a certain % of their student loans would be forgiven (I think just the provincial loans.) stay long enough and your loans could be completely forgiven.




Originally Posted by BristolUK View Post
Googling suggests they don't have to be repaid while certain conditions remain met and then do if the conditions are no longer met. When I've seen mention of them it's always seemed they don't have to be repaid full stop. But maybe I just got that wrong.

Loaned by government or organisations set up by gov.
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Old Oct 26th 2019, 10:03 pm
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Default Re: Question for 'Big Business' experts

Originally Posted by Jsmth321 View Post
Sometimes governments use those type of incentives to get certain professions to relocate to areas of need. I don't know if BC still does it, but if a nurse moved to certain regions for each year they worked in said region a certain % of their student loans would be forgiven (I think just the provincial loans.) stay long enough and your loans could be completely forgiven.
JS, any good sites for looking at real estate in LA? Just curious, not moving.
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