Adam Neumann is facing a coup. Can We work without him?
The We Company CEO’s superhuman image has allayed investor concerns — until now
Adam Neumann’s vision and hype built WeWork into the largest provider of office space in the world. But his eccentric and self-serving behavior, failed IPO plans and hemorrhaging losses at the company have prompted SoftBank — its largest investor — to push for his ouster as CEO.
“Could the company survive without Adam?” said Sam Zell, the chairman of Equity Group Investments. “I’m sure they could.”
A profile last week in the Wall Street Journal revealed that Neumann smoked marijuana on a private flight overseas, prompting the jet’s owner to recall the plane.
That appears to be the tipping point for SoftBank’s founder Masayoshi Son, who is pushing to remove Neumann from the top job, according to a report Sunday from CNBC. Neumann would move into a non-executive chairman role, according to the Wall Street Journal. Representatives for the We Company declined to comment.
“What can get these guys in trouble is their egos and arrogance,” said Ray Mikulich, the chairman of commercial real estate software giant Altus Group and Colony Capital board member. “The skills and attributes that make a founder successful are not necessarily well suited for a public environment.”
The removal of a company’s founder before an IPO has precedent. At Uber, co-founder and CEO Travis Kalanick left the company after a laundry list of scandals and missteps. He was replaced by Dara Khosrowshahi, who ultimately led the company to its public offering in May.
Other founders, however, have managed to hold on to their notable startups even in the face of controversy.
Elon Musk, who remains at the helm of Tesla, has been cited in recent years for erratic behavior, including smoking marijuana on a live radio show and prompting a U.S. Securities and Exchange Commission investigation with a single tweet. Mark Zuckerberg faced pressure to leave Facebook after a series of privacy-related scandals but has remained at the helm.
Neumann’s own dubious behaviors — recent disclosures include a desire to become president of the world, prime minister of Israel, the first trillionaire and to live forever — appear to be the final straw for some directors of WeWork’s parent company.
But others direct blame for WeWork’s misgivings at the board, which includes representatives from investors SoftBank and Hony Capital. Scott Galloway, a marketing professor at New York University and outspoken skeptic of WeWork’s valuation, said that the board appears to exist to enable Neumann’s control of the company.
“Adam’s not the problem, but a weak board that has let him engage in self-dealing and set no boundaries,” Galloway wrote in an email. “Good boards are fiduciaries for all stakeholders.”
Some see a benefit to Neumann leading the company in the public markets — in part because the process of finding an equally skilled fundraiser would pose a challenging task, said Rett Wallace, CEO of Triton Research Inc.
“It’s not super clear you can get others to do that,” said Wallace, who previously worked as an investment banker with Allen & Company and Morgan Stanley. “If you take the cult leader out of it, everything collapses.”
However, if the IPO does not go ahead, the company’s future relies on Neumann’s ability to attract further investment from SoftBank — an unlikely scenario given Sunday’s reports.
The fallout began last month, when Neumann and other We Company executives were caught off guard by negative feedback to its IPO prospectus. Among the disclosures were inexplicably large loans and payments to Neumann, failed ventures and no path to profitability in the foreseeable future.
The company said last week it would delay its IPO but promised to complete it before the end of the year. It’s also taken steps to right the ship.
The firm said it would unwind a $5.9 million payment to Neumann for the use of the “We” trademark. In the event he dies or is incapacitated, his wife Rebekah Neumann is no longer assigned to pick his successor.
Some say the concessions don’t go far enough: Neumann still holds a majority voting control of the We Company’s board. Who decides on his future with the company should be made by shareholders, Zell said.
“There’s a bunch of people who are $12 billion invested in this thing,” he said. “They’re the ones who should make the call.”