Adam Neumann May Step Down As WeWork CEO Under Pressure From SoftBank
The man who took WeWork from a tiny startup to the brink of an IPO may not survive the fallout of the attempted offering's potential failure.
One week after The We Company announced it is delaying its initial public offering, co-founder and CEO Adam Neumann is in talks with the company's board and biggest investors to potentially step down as chief executive, Reuters reports. Reportedly leading the push to oust Neumann is Masayoshi Son, who has been WeWork's biggest financial supporter in his role as head of SoftBank Group.
In the past few years, SoftBank Group and its venture capital arm SoftBank Vision Fund have invested over $10B in The We Company, with its most recent infusion taking the startup's valuation to a dizzying $47B. In the weeks after The We Company filed for an IPO, estimates of its public valuation dropped as low as $10B.
SoftBank owns about a third of WeWork, but Neumann's unique ownership structure gives him total control of the company, including the power to fire the entire board, The Wall Street Journal reports. Neumann had previously handpicked a committee including his wife, Rebekah Neumann, to appoint a successor if he left the company, but agreed to negate that part of WeWork's ownership structure to appease potential investors.
Neumann has pledged to give back to WeWork any profits he realizes from personally leasing office space to the company in buildings he acquired, an attempt to dispel concerns about potential conflicts of interest, Bloomberg reports.
He has also agreed not to appoint any family members to the board, which has been given full authority to name a new CEO if Neumann steps aside. If he does so, one potential arrangement would have him slide into a non-executive chairman role, Bloomberg reports.
The We Company postponed a Monday board meeting until later in the week to prepare for discussions about Neumann's future with the company, the WSJ and CNBC report.
Another scenario would involve Neumann remaining CEO, but with a new chairman appointed by the board to provide a check on his power, Reuters reports. Neumann is reluctant to give up his position, according to The New York Times, and still has allies on the board that are not affiliated with SoftBank.
SoftBank had reportedly been the driving force in delaying The We Company's IPO, seeking to preserve the value of its investment, and by extension that of Vision Fund's main backers: the Public Investment Fund of Saudi Arabia and Abu Dhabi's Mubadala Investment Co. If Neumann were to be removed as CEO, an IPO before the end of the year would be unlikely, CNBC reports.
A WSJ report detailing Neumann's erratic behavior has reportedly eroded Son and other investors' confidence in his leadership just as much as his complex business and personal ties to the company he co-founded. Lenders who extended Neumann a $500M line of credit backed by his stake in WeWork are trying to renegotiate the terms of that loan, according to Bloomberg.
Neumann's public image has reportedly taken such a beating that multiple investors are exploring legal action against his dealings with his company, alleged drug use on the job and misuse of company funds, the NYT reports.
One of SoftBank's allies in the battle over WeWork's leadership is Benchmark Capital, which also joined SoftBank as investors in Uber Technologies. Benchmark led the movement to remove Uber CEO Travis Kalanick from his position after his own personal issues grabbed headlines ahead of the ride-sharing company's IPO earlier this year, CNBC reports. Uber's shares are still trading at a 28% discount to their initial public value, the WSJ reports.