The Demise of WeWork’s Adam Neumann

The writing was on the wall as a failed IPO, massive workforce layoff, and staggering company devaluation ($47 billion to $15 billion) all combined to catalyze the resignation of embattled Israeli co-founder and CEO, Adam Neumann. WeWork, the co-working conglomerate catering to hip freelancers and remote workers, has been on a dizzying slide the last few months, with deep market criticism of their planned IPO making headlines almost daily.

“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive,” Neumann said in a statement.

Critics assert that WeWork is an office subleasing company masquerading as a tech giant; the entity acts as little more than a landlord and should be valued as such.

Scoffs at the very notion that WeWork should be considered and valued as anything besides a real estate business dealing almost exclusively in physical space grew boisterous recently as Neumann embarked on an eccentric, at times desperate, promo tour ahead of the failed IPO launch. Silicon Valley is no stranger to tech companies employing erratic chief execs, often embracing the bizarre behavior of the likes of Elon Musk. But Neumann was no Musk. He was not building electric cars. He was not building rockets. Hell, Neumann wasn’t creating anything. WeWork can try as they might to convince the Valley that they are a tech company, but they are simply a very sexy, very hip, office space landlord. With kombucha!

Neumann’s tragic fall was fast tracked when The Wall Street Journal ran an piece detailing some of the ex-CEO’s personal scandals. Specifically, the WSJ exposed an incident from last summer in which Neumann and friends smuggled a sizeable haul of weed aboard a private trans-Atlantic flight. The jet owner recalled the plane, and left Neumann and crew in Israel to find their own way back to New York City.

Still, WeWork and Neumann continued their eccentric roadshow in anticipation of a wildly overpriced IPO debut, and the company filed its IPO paperwork in August. WeWork’s plan to go public collapsed rapidly in the wake of the official filing after heated criticism and waning investor interest threatened the company’s capacity to raise the $3 billion necessary to access its $6 billion credit line.

Silicon Valley venture-capital market was reluctant to bite. Investors weren’t convinced WeWork was a tech company. And here’s the rub: The tried-and-true property industry wasn’t interested either, because WeWork had so thoroughly convinced enough people that it was a tech company that its price-tag had spiked too high.

Spiraling losses, increasingly bizarre behavior, and questionable corporate governance combined with an exodus of top staffers, including the departures of more than a dozen top officials, to seal Neumann’s fate. On August 15th, Morgan Stanley backed out of the IPO after losing the lead underwriter role in the deal. In late August, #WeWTF started trending online as an NYU professor demolished the company’s valuation. After some tumultuous talks with SoftBank, WeWork’s largest shareholder, the company halved the initial IPO valuation hoping to encourage investor interest, to no avail. The IPO was put on hold, and the board formally announced changes to company governance, including Neumann’s authority. Neumann’s voting power was slashed to 10 votes per share, and Neumann’s wife Rebekah was banned from the board.

On September 16th, Reuters reported that WeWork’s IPO was indefinitely delayed, and the company’s delayed plan to go public decimated bond prices. WeWork’s bonds fell as much as 7 cents on the dollar, the most since they were issued in April 2018. Finally, on September 24th, Neumann announced he was stepping down from his role as WeWork CEO. The Wall Street Journal first reported on Tuesday that Neumann would step down as WeWork CEO, but remain chairman of the We Company, with reports stating Sebastian Gunningham and Artie Minson, two current executives at the company, have been named co-chief executives.

More to come as this unfolds.

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