WeWork's biggest backer, several other investors, and some board members are reportedly plotting to remove cofounder Adam Neumann as CEO as soon as this week after the shared-workspace provider postponed its IPO amid concerns about its business model, valuation, and governance.
The company's board brought forward a meeting this week and now intends to meet on Monday, where some members may propose Neumann step down as CEO and become non-executive chairman, according to The Information. However, ousting Neumann could prove challenging as he holds the vast majority of voting rights and can single-handedly fire the entire board.
SoftBank founder Masayoshi Son — whose Japanese conglomerate has invested nearly $11 billion into WeWork and looked set to splurge another $1 billion on its shares to support its IPO — has "lost faith" in Neumann and wants him out, according to the Financial Times.
SoftBank's vice-chairman and a former board member sit on WeWork's board, and could call for a board meeting this week to demote Neumann, the Financial Times said. SoftBank might ask him to serve as interim CEO while a headhunting firm finds a replacement CEO, Reuters reported.
Several WeWork board members and large investors are discussing ways to replace Adam Neumann, according to the New York Times. However, some board members aren't on board with SoftBank and want to retain Neumann as CEO, according to CNBC.
Investors have proposed ousting Neumann by levelling legal threats at him over "self-dealing," the Times said. Neumann holds stakes in companies that have bought properties then leased them to WeWork, giving him conflicting incentives as both landlord and tenant.
Other shareholders are calling for an inquest into Neumann's use of company money and whether he took drugs while working, the Times said. Neumann smoked marijuana on a flight from New York to Israel, according to the Wall Street Journal. After the flight crew discovered more of the drug stuffed in a cereal box for the return journey, the jet's owner recalled the plane before Neumann reboarded, the newspaper said.
WeWork declined to comment on the Journal's drug allegations. A WeWork spokeswoman declined to comment on this story to Business Insider.
If Neumann resists, ousting him won't be easy. However, Benchmark Capital — a major WeWork investor that wants Neumann to step aside, according to Reuters — has a history of removing cofounder-CEOs. The venture capital firm successfully rallied shareholder support to replace Uber boss Travis Kalanick before the scandal-hit ride-hailing giant went public in May, Reuters said.
Since WeWork filed to go public in August, Neumann has faced mounting scrutiny. The WeWork boss has raised over $700 million by selling and borrowing against WeWork stock, given himself unassailable control of the company, leased properties to WeWork, charged it nearly $6 million for the "We" trademark, and employed immediate family members.
Those red flags, coupled with mounting doubts about the resilience and profitability of WeWork's business model, forced the company to slash its targeted public valuation to below $20 billion — well below the private valuation of $47 billion it secured in January. After an overhaul of its governance failed to relieve investors' concerns, WeWork faced the prospect of failing to raise the $3 billion needed for it to unlock $6 billion in bank financing, leaving it with little choice but to delay its public debut.