NEW YORK, Sept 25, 2019 (BSS/AFP) – WeWork co-founder Adam Neumann said
Tuesday he is stepping down as CEO of the office sharing startup, calling the
increased scrutiny he faced in recent weeks “a significant distraction.”
Neumann’s announcement, which confirmed earlier AFP reporting, comes as the
startup faces questions over its governance and profit outlook that have
clouded its prospects for going public.
Prior to his announcement, Neumann had faced pressure from board members
tied to SoftBank, a major investor, according to people with knowledge of the
matter.
Neumann also met Sunday with Jamie Dimon, CEO of JPMorgan Chase, the lead
underwriter for the company’s initial public offering, and the encounter
weighed on Neumann’s decision to step down, the sources said.
The outgoing CEO has come under scrutiny for perceived self-dealing as head
of the fast-growing enterprise.
In its prospectus to go public, WeWork disclosed that it had leased from
entities in which Neumann “has or has had a significant ownership interest.”
In a subsequent securities filing earlier this month, parent The We Company
said that it was cutting the voting power in Neumann’s “super shares” and
that Neumann would give the company any profits he reaps on private
transactions made with the startup.
However, those moves proved insufficient to shift the negative momentum
surrounding the offering since it was formally initiated in August.
– Valuation slashed –
The New York-based startup that launched in 2010 has touted itself as
revolutionizing commercial real estate by offering shared, flexible workspace
arrangements, and has operations in 111 cities in 29 countries.
However, the company, which lost $1.9 billion last year, has faced
skepticism over its ability to make money, especially if the global economy
slows significantly.
Architects of the offering had scaled back the valuation target for the
company from $47 billion to under $20 billion as they pushed back the
timeframe.
The IPO is now unlikely to happen before the end of the year, according to
a source, adding that the earliest period would be 2020.
Neumann will remain as chairman of the company he started in 2010 and also
continues to control a majority of voting shares.
“As co-founder of WeWork, I am so proud of this team and the incredible
company,” Neumann said.
“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.”
The company named as co-CEOs Chief Financial Officer Artie Minson and
former vice chairman Sebastian Gunningham.
“We would like to thank Adam for his vision and his passion in building
WeWork over the past 9 years,” Minson and Gunningham said in a statement.
“Our core business is strong and we will be taking clear actions to balance
WeWork’s high growth, profitability and unique member experience while also
evaluating the optimal timing for an IPO.”