Table of Contents WEWORK COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 During the year ended December 31, 2018, certain warrant holders exercised warrants and acquired an aggregate of 1,577,434 shares of Class B Common Stock. The Company received $0.6 million in proceeds from these warrant exercises. 2018 Warrant Issued to Related Party—On November 1, 2018, the Company entered into a warrant agreement with SBWW Cayman, an affiliate of which is a principal stockholder with representation on the Company’s board of directors, pursuant to which the Company agreed to issue shares of the Company’s capital stock (the “2018 warrant”). Under the terms of the 2018 warrant, in exchange for the issuance of the Company’s capital stock in the future, SBWW Cayman will make a payment of $1.5 billion on each of January 15, 2019 and April 15, 2019. The Company may elect to cancel either of these payments on the date such payment is due. The Company may also elect to defer the January 15, 2019 payment to April 15, 2019. Unless earlier exercised in connection with a Qualifying IPO, a qualifying preferred stock financing, a sale of the Company or certain insolvency events, the right of SBWW Cayman to receive shares of the Company’s capital stock will be automatically exercised on September 30, 2019 at a per-share price of $110. During the year ended December 31, 2018, the Company recognized a capital contribution of $69.0 million and an equal off-setting amount within additional paid-in capital representing the fair value of the arrangement prior to being drawn. The measurement of the 2018 warrant is considered to be a Level 3 fair value measurement, as it was determined using observable and unobservable inputs. This 2018 warrant was amended in January 2019, see Note 26 for additional details regarding this subsequent event. 2017 Tender Offer—In October 2017, with the approval of the Company, an investor executed a $1.3 billion tender offer for acquisition of all eligible outstanding convertible preferred and common stock, including the shares underlying exercisable options, warrants and convertible notes of the Company. Holders of Series G Preferred Stock and Junior Preferred Stock were not eligible to participate in this offering. At the close of the tender offer, 22,871,249 shares of Class A Common Stock were acquired by the investor for $949.0 million. All shares of Class B Common Stock sold in the tender offer were, in accordance with their terms, converted to shares of Class A Common Stock prior to their transfer to the investor. In addition, 7,968,505 shares of Senior Preferred Stock were acquired by the investor for $351.0 million. The convertible preferred stock acquired in this offering retained their original rights and preferences. Of the 22,871,249 shares of Class A Common Stock, 9,415,659 shares were acquired from employees of the Company at a price of $51.81 per share, which resulted in $271.0 million of additional stock-based compensation expense during the year ended December 31, 2017. Common Stock Repurchase—In November 2018, the Company’s board of directors approved the repurchase from an employee of 204,580 shares of Class B Common Stock (including shares underlying vested and exercisable options) at a price of $51.81 per share. As the repurchase price was above the fair market value of the shares acquired, this repurchase resulted in $10.4 million of additional stock-based compensation expense during the year ended December 31, 2018. Nonrecourse Stockholder Loans—On May 30, 2013, the Company issued Stockholder Loans (the “2013 Stockholder Loans”) totaling $10.4 million maturing on May 30, 2016, with interest due at a rate of 0.2% per annum. The 2013 Stockholder Loans were collateralized with an aggregate of 14,559,510 shares of the Company’s common stock owned by the borrowers (the “2013 Collateral Shares”). The 2013 Collateral Shares were fully vested shares received by the borrowers prior to the transaction in exchange for services previously rendered to the Company. The 2013 Stockholder Loans also provided the Company the option to purchase 5,599,845 of the 2013 Collateral Shares for $1.85 per share (“Purchased Call Option”), subject to the terms and conditions of the loan agreements. In May 2016 the Company purchased and retired the 5,599,845 shares and settled the 2013 Stockholder Loans by exercising its Purchased Call Option. As a result, the liability component related to the Purchase Call Option was settled through an increase to additional paid in capital in the amount of $6.4 million in May 2016. F-51