Adam Neumann has been pushed out as chief executive of WeWork after some of the lossmaking property company's biggest backers lost faith in the 40-year-old co-founder in the wake of the dramatic collapse of its initial public offering.
Mr Neumann has also agreed to cede control of the company, as he will no longer hold a majority of voting rights in the group, according to people briefed on the matter.
Finance chief Artie Minson and WeWork vice-chair Sebastian Gunningham will take over as co-chief executives and Mr Neumann becomes non-executive chairman.
The fall from grace of Mr Neumann is a stunning reversal at the young, hyped, venture-backed company where the cult of the founder was once especially strong. It compares in recent years only to the toppling of Travis Kalanick as Uber's chief executive.
The reshuffle was approved by the WeWork board on Tuesday.
“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive,” Mr Neumann said.
In an email written jointly to staff, the new CEOs said they would focus on “improving our management and operations”, adding: “While we anticipate difficult decisions ahead, each decision will be made with rigorous analysis, always bearing in mind the company’s long-term interests and health.”
Adam is that very rare breed of entrepreneur who has the vision and drive to conceptualise an enormous business opportunity and then attack it relentlessly
Lew Frankfort, WeWork board member
The frosty response from institutional investors that can make or break an IPO ultimately led WeWork to delay the stock market listing, which put in doubt as much as $10bn of capital that it had expected to raise in the offering and a related loan package.
SoftBank, WeWork’s largest outside investor, had pressured the company to delay the IPO after public investors refused to bankroll the company at anything like the $47bn valuation of its most recent fundraising.
Investors raised concerns over WeWork’s increasing losses, its complex corporate structure and the sway Mr Neumann had over the company. A series of loans and payments made by the company to Mr Neumann became a flashpoint for asset managers as bankers at JPMorgan and Goldman Sachs sought to drum up interest in the flotation.
While the company sought to address governance concerns ahead of its listing, and went so far as to reduce the power of Mr Neumann’s voting stock, investors said it did not go far enough.
A bloc of directors began pushing for Mr Neumann’s demotion in the wake of the IPO delay.
Mr Neumann agreed on Tuesday to go further than just stepping down as chief executive. His special voting shares, which had earlier held as much as 20 times the power as regular shares, will be cut down to 3 times the power, people briefed on the matter said. He will also only control a minority of board appointments and will not have a say over the make-up of board committees, they added.
A person who worked closely with the entrepreneur said that Mr Neumann’s outsized personality had been one of the major problems with getting WeWork in shape to become a publicly listed company sooner.
In Tuesday’s statement, WeWork board member Lew Frankfort said: “Adam is that very rare breed of entrepreneur who has the vision and drive to conceptualise an enormous business opportunity and then attack it relentlessly.”
Both Mr Frankfort and fellow director Bruce Dunlevie, a partner at Benchmark and an early investor in WeWork, praised Messrs Minson and Gunningham as executives who would lead "the next phase of growth".
The promotion of Mr Minson, 48, follows a long career working for flamboyant entrepreneurs, including the likes of CNN's Ted Turner and Ted Leonsis and Tim Armstrong of AOL. The Ernst & Young-trained accountant joined WeWork in 2015 as president and was named chief financial officer the following year.
He has been WeWork's liaison to Wall Street as the company prepped its IPO, spending much of this year holed up at the law firm Skadden Arps to draft the filing, and was instrumental in the company's negotiations with SoftBank.
Mr Gunningham, 57, has previously held positions at Amazon, Oracle and Apple and has been leading WeWork's automation efforts since March last year.
Messrs Minson and Gunningham said they would evaluate “the optimal timing for an IPO”. A new financing package for the group is of increasing importance to WeWork’s creditors and its management committee.
The group has burnt through capital as it has rapidly expanded its co-working spaces to more than 110 cities. In the first half of 2019 the company reported cash outlays of almost $2.6bn to operate and invest in its business, almost as much as it spent on those in the whole of 2018.
Mr Minson will be in charge of the company’s finance, legal, human resources, real estate, public affairs and corporate development functions. The company said Mr Gunningham would have oversight over product, design, development and sales and marketing.
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