Table of Contents WEWORK COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 The Company estimates the fair value of stock option awards granted using the Black-Scholes Model and a single option award approach. The assumptions used to value stock options issued during the years ended December 31, 2016, 2017 and 2018, were as follows: Year Ended December 31, 2016 2017 2018 Fair value of common stock $ 18.98 - 21.57 $ 21.57 - 26.45 $ 26.45 - 26.75 Weighted average expected term (years) 6.28 6.42 6.19 Weighted average expected volatility 40.0% 40.0% 40.0% Risk-free interest rate 1.03 - 2.23% 1.78 - 2.32% 2.41 - 2.99% Dividend yield — — — For the years ended December 31, 2016, 2017 and 2018, the Company recorded total stock-based compensation expense of $12.0 million, $16.9 million and $44.3 million, respectively, related to stock options awarded to employees and non-employee directors. As of December 31, 2016, 2017 and 2018, the unrecognized stock-based compensation expense from outstanding options awarded to employees and non-employee directors was approximately $32.2 million, $71.5 million and $136.9 million, respectively, expected to be recognized over a weighted-average period of approximately 3.9 years, 4.2 years and 3.9 years, respectively. For the years ended December 31, 2017 and 2018, the tax benefit realized from stock options exercised was $70.0 million and $13.1 million, respectively. For the years ended December 31, 2016, 2017 and 2018, the Company recorded $0.7 million, $1.3 million and $1.1 million, respectively of general and administrative expenses related to stock options awarded to non-employee contractors for services rendered. For the year ended December 31, 2018, the Company also recorded $1.9 million of growth and new market development expenses related to stock options awarded to non-employee contractors for services rendered. As of December 31, 2016, 2017 and 2018, there was $3.4 million, $4.5 million and $8.1 million of total unrecognized expense related to stock options awarded to contractors expected to be recognized over a weighted-average period of approximately 3.4 years, 3.4 years and 4.2 years, respectively. For the years ended December 31, 2016, 2017 and 2018, the Company recognized none, $0.9 million, and $1.1 million, respectively, of charges for stock options awarded to non-employees relating to goods received and services provided that was capitalized and recorded as a component of property and equipment on the accompanying consolidated balance sheets. As of December 31, 2017, and 2018, there was $1.0 million and $1.2 million of total unrecognized cost related to these stock options expected to be recognized over a weighted-average period of approximately 3.3 years and 2.3 years, respectively. Early Exercise of Stock Options—The Company allows certain employees and directors to exercise stock options granted under the 2013 Plan prior to vesting. The shares received as a result of the early exercise of unvested stock options are subject to a repurchase right by the Company at the original exercise price for a period equal to the original vesting period. During 2014, certain individuals early exercised stock options prior to vesting; however, in lieu of the cash consideration required to exercise the stock options, these individuals each provided a 1.9% interest bearing recourse note, for an aggregate of $2.5 million, $2.7 million and $2.7 million as of December 31, 2016, 2017 and 2018, respectively. As a result of the early exercises, the individuals received shares of restricted Class B Common Stock which will vest over a specified period of time (which period of time is consistent with the original vesting schedule of the stock options grant). The restricted Class B Common Stock is subject to repurchase at the original exercise price by the Company over the original vesting term. The recourse notes mature in November 2023 and are included as a component of equity. F-53