Board members at WeWork are planning to show founder Adam Neumann the door and bring a more responsible CEO at his place to help the company’s public offering.
IPO embarrassment leads to change
Regardless of how much Neumann wants to elevate the consciousness of the world, his board members aren’t buying it. The company was last valued at $47 billion in private funding but found no takers in the market even after it slashed its valuation by half. Neumann unusually close connection with the company was one of the major reasons why investors remained skeptical of the company.
According to sources, the board plans to meet on Monday and discuss the prospects of the company if Neumann leaves his current role as CEO and becomes a non-executive chairman of the company. Interestingly, the company’s biggest investor SoftBank is also not in favor of Neumann continuing as company chief.
The company, which is still unprofitable received $12 in funding from SoftBank and has a pending $6 billion loan that is contingent on its IPO. If the company fails to go public soon, it will not only be at odds with existing investors but would face a serious cash crunch too. It will have to go public before the end of the year to keep the $6 billion loan promise intact.
What’s the problem with Neumann?
Neumann has become a cult figure within his own company and holds immense management control. Even the IPO of the company would have given him 1:10 voting power, 50% of the previously planned 1:20 votes. The company’s corporate structure was also criticized extensively, and it became apparent that the CEO was the owner in some of the buildings rented out to the company.
According to Hass School of Business (University of California Berkley) professor Kellie McElhaney, WeWork is an “Uber-scale mess.” She said He’s really taken a first-mover advantage that WeWork had in the space and blown it in a big way.” She also blamed the CEO and the company’s board for not learning from their mistakes. Even Uber’s Travis Kalanick was driven out of the company before it went public while its valuation was significantly reduced.
But WeWork is unique in many ways. For instance, Neumann enjoys extreme voting power disparity, and he may remove the entire company board if he wanted to. Again, the company’s unusual governance and corporate structure would be to blame.