Group of WeWork Directors Seeks to Oust CEO -- WSJ
September 23 2019 - 3:02AM
Dow Jones News
SoftBank officials are among those who are expected to push for
Neumann's removal
By Maureen Farrell, Liz Hoffman, Eliot Brown and David Benoit
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 23, 2019).
A bloc of WeWork directors is planning to push Adam Neumann to
step down as chief executive after a tumultuous week in which his
eccentric behavior and drug use came to light, and the startup
delayed its much-anticipated stock-market listing.
A group including officials tied to SoftBank Group Corp., the
company's largest investor, wants Mr. Neumann to relinquish his
title of CEO of We Co., the parent of the office-sharing company,
people familiar with the matter said.
The board is expected to meet as soon as this week and
potentially consider a proposal for Mr. Neumann to become We's
nonexecutive chairman, some of the people said. That would allow
him to stay at the company he built into one of the country's most
valuable startups, but inject fresh leadership to pursue an IPO
that would bring We the cash it needs to keep up its torrid
growth.
The company burned through more than $2 billion in 2018 and
analysts have projected that on its current path We will run
through what it has on hand sometime next year.
Any attempted coup is a gamble: Mr. Neumann still has allies
among the directors and the ability to fire the entire board thanks
to shares he controls that carry extra votes. But SoftBank, which
has invested more than $9 billion into the company and is
represented on the board, has considerable influence too, and We
needs the Japanese conglomerate to continue pumping in cash.
It couldn't be learned how all of the We directors -- there are
seven including Mr. Neumann -- are aligned, and the situation is
fluid.
SoftBank's patience has been tested. Earlier this year, it
bought shares of We at a $47 billion valuation, a level that now
looks wildly overblown. As We prepared to list its shares earlier
this month, the company's expected valuation had fallen to roughly
a third of that.
Even at that discount, We was forced to shelve the offering as
criticism mounted of the company's governance and its financial
losses -- $1.6 billion last year, and growing -- despite its rapid
revenue growth.
The Wall Street Journal reported last week that Mr. Neumann had
taken marijuana on a flight from New York to Israel, prompting the
jet's owner to recall the plane. The revelation added to concerns
over Mr. Neumann's management style and transactions with the
company that made him rich.
We already had made governance changes meant to win over
reluctant investors. On Sept. 13 it decreased the potency of Mr.
Neumann's supervoting shares -- still leaving him firmly in control
-- as well as reducing his wife's role in corporate matters and
reversing his controversial sale to the company of a trademark of
"We."
Some of SoftBank's executives have long been wary of We's
soaring valuation and Mr. Neumann's unusual behavior, even as they
continued to give him money. SoftBank was expected to buy as much
as $1 billion in stock in We's initial public offering, a large
portion of the roughly $3 billion it sought to raise from
investors, people familiar with the matter said. That commitment
wasn't enough to keep the listing on track, though We has pledged
to get it done this year.
SoftBank CEO Masayoshi Son has long been a vocal advocate of We
and Mr. Neumann, who, like him, is viewed by many as a visionary.
Mr. Son told CNBC in March he still wanted to invest more in the
company despite the misgivings of some of his own investors.
SoftBank has invested in We directly and through the Vision Fund, a
$100 billion pool it raised in 2017.
The Vision Fund's $4.4 billion investment in 2017 valued We at
about $20 billion. When the fund's biggest investors, a pair of
Middle Eastern governments, balked last year at investing more,
SoftBank itself stepped in, committing $4 billion at a $47 billion
valuation.
Mr. Neumann wouldn't be the first startup founder forced out by
controversy. Uber Technologies Inc.'s Travis Kalanick was pushed
out by his board in 2017 after the ride-hailing company was widely
criticized for a chauvinistic and toxic work culture. Uber went
public this spring with a new chief executive brought in from the
outside.
Write to Maureen Farrell at maureen.farrell@wsj.com, Liz Hoffman
at liz.hoffman@wsj.com, Eliot Brown at eliot.brown@wsj.com and
David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
September 23, 2019 02:47 ET (06:47 GMT)
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