Adam Neumann, who cofounded WeWork and turned it into one of the world’s most valuable start-ups, on Tuesday stepped down as chief executive officer under pressure from the board.
He takes a new role as non-executive chairman and forfeits his control over management decisions.
The move is designed to salvage an initial public offering (IPO), which had been met with immediate scorn from public investors. A litany of apparent conflicts of interest and Neumann’s propensity to burn through capital were chief concerns.
Photo: AP
“In recent weeks, the scrutiny directed toward me has become a significant distraction,” Neumann, 40, said in a statement. “I have decided that it is in the best interest of the company to step down as chief executive.”
Two senior WeWork executives, Sebastian Gunningham and Artie Minson, were appointed as co-CEOs.
WeWork’s parent company, We Co, still intends to go public at some point, but people briefed on the deliberations said it is unlikely to take place as soon as next month, as was planned.
The new CEOs said in a statement that they would be “evaluating the optimal timing for an IPO.”
We Co is under a tight deadline to go public.
It must do so by the end of the year to secure a US$6 billion debt financing contingent on a successful stock offering.
The company, which is deeply unprofitable, will need to find an alternative source of capital next year if this year’s IPO falls through.
Gunningham and Minson “anticipate difficult decisions ahead” to protect the company’s “long-term interests and health,” they wrote in an e-mail to staff reviewed by Bloomberg.
Over the past nine years, WeWork raised more than US$12 billion to set up coworking spaces around the world, where people rent desks and conference rooms.
Neumann and his cofounder, Miguel McKelvey, have long promoted a higher mission for the company than being a commercial real-estate landlord.
Neumann’s We-powered rocket ship hit turbulence early this year. Softbank Group Corp, its largest investor, called off a plan to buy a controlling stake in the business for US$16 billion.
The Japanese conglomerate put in US$2 billion instead, and Neumann embarked on a flight to the stock market for additional capital.
WeWork published its IPO prospectus last month and investors were aghast. The company had never turned a profit and failed to make a convincing case it could do so. The company had lent Neumann money as it paid him rent on buildings he owned. WeWork paid him about US$6 million for a trademark to the name “We.” The board is composed entirely of men.
Neumann, his board and their financial advisers were wholly unprepared for the reaction from public investors. They took steps to address these issues, but some directors decided they would need to go further. Softbank founder Masayoshi Son pushed for Neumann’s resignation as an apparent way to satisfy prospective investors in WeWork and in his own ventures, which are in many ways tied to the fortunes of WeWork.
The management changes show would-be investors that WeWork is trying to tackle corporate governance concerns. The new chiefs convened WeWork employees on Tuesday for an all-hands meeting to discuss the changes.
Although Neumann was notably absent, Gunningham and Minson were joined onstage by two investors and maintained an upbeat tone, according to two people who watched the presentation.
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