What should have been a victory lap has turned into a rather ragged obstacle course for WeWork, the co-working juggernaut.
WeWork (recently rebranded as the We Co.) was forced to postpone its hotly anticipated initial public offering after filings last week showed billions in losses and potential conflicts of interest for Adam Neumann, its controversial and charismatic chief executive. Though his unconventional leadership style helped propel the company to a $47 billion valuation, it could cost him his spot at the company’s helm.
The prospectus, which showed WeWork had blown through more than $2 billion in 2018, cast serious doubts on the company’s business model, profitability and stability. Now a group of board members tied to SoftBank, the Japanese tech giant and WeWork’s biggest investor, wants Neumann out as CEO because they have lost faith in his leadership, according to multiple media reports.
According to the Wall Street Journal, board members could meet as soon as this week. They want Neumann to drop the CEO mantle and become non-executive chairman, which would give him a role at the company he built while bringing in new leadership to push through the IPO.
WeWork declined to comment. SoftBank did not immediately respond to a request for comment.
The 40-year-old Neumann easily fits the bill of Silicon Valley disrupter. A towering 6-foot-5, he’s known for walking around the office barefoot and encouraging the free flow of tequila. His goals are wide-ranging and unbounded by reality – becoming the world’s first trillionaire, taking WeWork to Mars, living forever, being Israel’s prime minister or “president of the world,” according to reporting from the Wall Street Journal.
But Neumann’s life is intrinsically intertwined with WeWork’s business. He has the majority of voting rights and could fire the company’s entire board if he wanted. He has borrowed hundreds of millions against his stock holdings and holds stakes in multiple companies that own properties leased to WeWork, prompting allegations of self-dealing that are worrisome to investors. Neumann was even paid nearly $6 million by WeWork for the trademark rights to the word “We” during the company’s rebranding. (He later paid the money back, the company said in an updated filing.)
“Adam” appears in the prospectus 169 times.
“Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator, while thriving as a community and culture creator,” Neumann is described in U.S. Securities and Exchange Commission filings. “Given his deep involvement in all aspects of the growth of our company, Adam’s personal dealings have evolved across a number of direct and indirect transactions and relationships with the Company.”
The Israeli-born Neumann moved to the United States in 2001 after a stint in the Israeli navy and studied business at Baruch College in New York City. His last business venture before founding WeWork was a failed baby clothes company called Krawlers that made pants with kneepads for cushier crawling. In 2008, Neumann teamed up with an architect, Miguel McKelvey, to lease vacant space in the building they worked in and turn it into a hip, eco-friendly co-working space. The business grew into WeWork, which has pegged its brand to the notion that work is the axis of life.
WeWork is now the biggest private tenant in Manhattan and has hundreds of offices in more than 30 countries. Since its founding, it has raised more than $12 billion but has never turned a profit.
WeWork’s culture is a reflection of its founder. At mandatory “camp” each summer, thousands of employees gather for crafts and hard partying. They hear from speakers such as Deepak Chopra and settle in for performances from such artists as Lorde and the Red Hot Chili Peppers. Neumann abruptly banned meat from WeWork offices in 2018, leaving befuddled executives to sort out the details and explanation. His penchant for smoking pot while airborne prompted the private jet he was on to be recalled last summer after the flight crew discovered a cereal box stuffed with marijuana, the Wall Street Journal reported.
It was Neumann’s wild streak that attracted the attention of Masayoshi Son, chief executive of SoftBank, according reporting from the Wall Street Journal. Neumann had told others that Son appreciated his craziness, but “thought that he needed to be crazier.”
Neumann has suggested, at various times, that WeWork could help stop world hunger, solve the problem of parentless children and end the refugee crisis.
“I need to have the biggest valuation I can, because when countries are shooting at each other, I want them to come to me,” Neumann said, according to New York Magazine.
His wife, Rebekah Paltrow Neumann, helped co-found WeWork and serves as chief executive of WeGrow, the company’s private primary school. She is described as Neumann’s “strategic thought partner” in SEC filings and he has described her as his “co-founder for life.” She also is the cousin of Gwyneth Paltrow, the actress and founder of the natural health and lifestyle brand, Goop.
Rebekah Neumann’s role has diminished at WeWork following investor pushback, according to news reports, and is barred from serving on the company board. The Wall Street Journal reported that she ordered that a number of employees be fired after brief interactions with them because “she didn’t like their energy.” It’s unclear whether her orders were followed.
In 2017, Adam Neumann told Forbes that his company’s valuation was “more based on our energy and spirituality than it is on a multiple of revenue.” WeWork’s value has fallen to about a third of its estimated $47 billion valuation, according to multiple reports.
(c) 2019, The Washington Post · Taylor Telford