Adam Neumann, WeWork’s embattled co-founder and chief executive, is stepping down.
Neumann’s leadership has come under fire in recent weeks after the co-working space startup, recently renamed the We Co., postponed a bid to go public as its valuation plummeted. He will stay in leadership as nonexecutive chairman of the board.
He will be replaced by two co-CEOs: Artie Minson, formerly the company’s co-president and chief financial officer; and Sebastian Gunningham, who was vice chairman.
The news was reported by the Wall Street Journal on Tuesday and was later confirmed by the company.
The unseating of Neumann is the latest in a string of roller-coaster months for tech companies attempting to go public in what was supposed to be a record year. Ride-hailing giants Uber and Lyft both stumbled out of the gates with IPOs earlier this year, as investors failed to value the largely unprofitable companies as high as expected. Meanwhile, Slack Technologies debuted well with a direct offering.
The We Co. was valued at $47 billion as recently as January, according to Pitchbook. It publicly filed for an IPO in August, though the plan was delayed after investors expressed skepticism about the company’s valuation and concerns arose about Neumann’s leadership. Reuters reported earlier this month that the firm might seek a valuation as low as $10 billion.
The disappointing IPOs of Uber and Lyft brought increased scrutiny to the valuation of We Co., said D.A. Davidson analyst Barry Oxford. Investors have grown more concerned about a potential recession and are more reticent to invest in a company with such high, long-term costs. And the emphasis on Neumann’s leadership as core to the company’s future success signaled potential corporate governance issues.
“If you take those things and you throw in erratic behavior, that was the proverbial straw that broke the camel’s back,” said Oxford.
In a news release, Neumann said the scrutiny directed toward him “had become a significant distraction” and that it was in the company’s best interest for him to step down.
Neumann’s departure casts the future of the We Co. in doubt. In its IPO prospectus, the company said its success “depends in large part on the continued service of Adam Neumann.”
“If Adam does not continue to serve as our Chief Executive Officer, it could have a material adverse effect on our business,” the company wrote.
The 40-year-old Neumann has been a controversial figure for the company, in part because he walked around the office barefoot and made alcohol — including tequila — a big component of the startup’s culture, according to reporting by the Wall Street Journal. His goals include becoming a trillionaire, establishing WeWork on Mars and even becoming “president of the world,” the Wall Street Journal reported.
Neumann has majority voting rights, as well as the power to fire the board. His risky practices of borrowing against his stock, as well as holding stakes in companies that lease to the company have resulted in worries about potentially problematic self dealings.
WeWork even paid Neumann nearly $6 million for his trademark rights to the word “We” before he returned the money, according to company filings. The We Co. prospectus contains the word “Adam” 169 times.
“Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator, while thriving as a community and culture creator,” according to a company filing with the Securities and Exchange Commission. “Given his deep involvement in all aspects of the growth of our company, Adam’s personal dealings have evolved across a number of direct and indirect transactions and relationships with the Company.”
WeWork’s core “space-as-a-service” business involves turning leased buildings into co-working spaces that offer perks like yoga classes and kombucha taps. Recently, the company has expanded into other ventures under the We Co. umbrella, such as apartment rentals, data analytics and education.
Since its founding, the company has raised more than $12 billion in funding but has never turned a profit. It burned through $2 billion last year alone, according to its prospectus. Multiple outlets recently reported that some board members had lost confidence in Neumann and were contemplating his removal.
The company has hundreds of offices in more than 30 countries. It is currently the largest private office tenant in Manhattan.