WeWork's catastrophic attempt at an IPO has caused its seven-person board to remove Adam Neumann from the CEO job. Neumann has become the non-executive chairman, meaning he has no day-t0-day management role at the company.
WeWork has named two co-CEOs to replace him, Sebastian Gunningham, who joined We in March, 2018 with the title of vice chair and chief automation officer. He hailed from Amazon, Oracle and Apple; and Artie Minson, who had been the CFO, joining WeWork in 2015. He hailed from Time Warner Cable and AOL.
The downfall of Neumann is an example of the free market performing well, says Nell Minow, Vice Chair of governance and investor advisory firm ValueEdge Advisors. Investors looked at this company, saw its problems and said no thanks.
But she also criticized the board and the bankers for letting this IPO get so out of control in the first place.
"He really had a moat around him to protect him from any kind of oversight, which is exactly the opposite of what you look for in a public company," Minow says.
"Any board member who's up to the job would have refused to take that position under those circumstances because you cannot do the job if you don't have the votes," she said. "The people to blame is Wall Street. Anyone who put the IPO out."
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Ultimately, pressure from SoftBank was the key to ousting Neumann from his seat of power at the company.
SoftBank's powerful founder Masayoshi Son was once Adam Neumann's biggest advocate, pouring money into the company at increasing valuations.
But Son "lost faith" in Neumann in recent days and wanted him out, reported to the Financial Times.
Son has reportedly been displeased with Neumann for ignoring Softbank's advice on everything from the timing of the IPO to using the phrase "elevate the world's consciousness" in the IPO prospectus, CNBC reports.
The Japanese conglomerate poured nearly $11 billion into WeWork and was set to spend another $1 billion on its shares to support its IPO, Markets Insider Theron Mohamed reports.
SoftBank is also a major stake owner of We's Asia operations including in China and Japan. Entities controlled by SoftBank rent space from We, accounting for $28.2 million in the first six months of 2019, up more than double from the prior year, according to the S-1. And Softbank also poured $180 million into We's venture investment "Creator Fund" which funded and/or employed at least two members of Neumann's family, Time reported.
Son is not only one of the world's most powerful businessmen, he was We's biggest investor, partner in Asia, and a big customer.
One problem: Neumann is still there.
The CEOs not only have to clean up this mess, they will have to do it under the nose of the founder. While he may not have voting control, charismatic founders like Neumann will still have his loyalists throughout the company, especially given how much nepotism occurred at We.
"It won't be easy because Adam is not going away. He's not going to change his behavior. His title doesn't impact what he does," warns NYU Stern professor Allen Adamson.
"He's not going to accept change easily," Adamson adds. "Once your head gets that big, you're not going to take directions from an operations, management bean counter type. But that's what's required to get this back on track. It's going to be painful. Lots of people are going to lose money."