Pressure is mounting to consider ousting Adam Neumann as WeWork’s chief executive after the office-sharing start-up delayed its much-anticipated initial public offering, and the company’s board is likely to convene this week, according to people familiar with the matter.
The board has not yet scheduled a definitive time to meet, said the people, who asked not to be identified because the matter wasn’t public.
Masayoshi Son — founder and CEO of Japanese conglomerate SoftBank Group Corp., which is WeWork’s biggest investor — is among those pushing for Neumann to resign, a person familiar with the matter said.
SoftBank expects Benchmark Capital, another large investor in WeWork, to be aligned with its position on Neumann, the person said. SoftBank has two representatives on WeWork’s board and Benchmark has one.
Representatives for WeWork, SoftBank and Benchmark declined to comment.
With the drama of a palace coup, Neumann has found himself at odds with SoftBank after widespread criticisms of the start-up’s governance and spending. Some directors are expected to raise the prospect of Neumann becoming non-executive chairman, the people said. The choice is ultimately Neumann’s, as the 40-year-old maintains effective control of management decisions.
The boardroom infighting imperils not only the IPO but also a $6-billion loan contingent on the deal. The unprofitable company — whose official name is We Co. — must complete a successful stock offering before the end of the year to keep access to the credit facility. Its debut high-yield bond dropped three cents on the dollar after news that some directors are planning to push Neumann out.
Talks with potential investors lowered expectations for WeWork’s planned IPO valuation to $15 billion or less, after a previous valuation of $47 billion, and WeWork conceded last week that its plans for going public would have to wait. Among the concerns the potential investors expressed: Neumann’s controversial style and control of the company.
Rarely has so much gone so wrong so fast for a young company in the spotlight.
“It’s Uber-scale mess,” said Kellie McElhaney, a professor at UC Berkeley’s Haas School of Business, who blames both the board and Neumann for not learning from that company’s earlier mistakes. “He’s really taken a first-mover advantage that WeWork had in the space and blown it in a big way.”
The news of Neumann’s potential ouster comes after a whirlwind week of uncertainty for WeWork. Banks that provided a $500-million credit line to Neumann are looking to revise the terms as the company’s struggle to go public casts doubt on the value of his collateral, people briefed on the discussions said last week. It’s not clear what changes they may seek or what right they may have to make demands.
On Friday, Wendy Silverstein, a big name in New York commercial real estate who joined WeWork last year as head of its property investment arm, left the company. She is spending time caring for her elderly parents.
The president of the Federal Reserve Bank of Boston also added to the angst. In a speech Friday in New York, Eric Rosengren warned that the proliferation of co-working spaces might pose new risks to financial stability.
“I’ve never seen a company of this size and scale generate such a consensus of negative opinion in my long, long life of following IPOs,” said Len Sherman, a Columbia Business School adjunct professor whose 30-year business career included time as a senior partner at consulting firm Accenture. “There is no box that they haven’t ticked when you think of all the reasons that you might be very concerned — like blaring red lights. Like, oh my gosh, caution, danger, danger.”