After the parent company of WeWork failed in its attempt to launch an IPO this month and the startup’s valuation was reported to slide by as much as 75 percent, Japan’s Softbank is now reported to have joined a shareholder revolt aimed at removing company founder Adam Neumann from his role as CEO of the office sharing giant.
The investment firm led by Masayoshi Son is the biggest investor in the We Company after putting over $10 billion into the startup, and now representatives of Son’s company are part of a group of board directors aiming to push Neumann into a non-executive role with the New York-based firm, according to an account in the Wall Street Journal.
The insurrection against the 40-year-old company founder comes as Neumann’s behaviour, including leading a group of friends in a marijuana smoking binge on a private Gulfstream jet flight to Israel last year, has been highlighted in the press as analysts dig into the company’s struggles.
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While Neumann’s shareholding in WeWork, which provides him with 10 times the voting rights of common stock, would prevent him being removed involuntarily, investors are said to be reacting to pressure from investment managers, at least some of whom have indicated that they would not invest in the company without a leadership change.
With the We Company having indicated last week that it still intends to hold its IPO this year, the rebel investors are considering a proposal to eliminate Neumann’s role in executive management this week, with the company founder being named non-executive chairman. Some board members are said to suggest that the Israeli entrepreneur continue on as interim CEO as a search for a permanent replacement moves ahead.
We investor and board member Benchmark Capital, is also backing Neumann’s removal, according to a report by Reuters. The venture investor, which rubbed elbows with Softbank on Uber’s board, had helped lead the ouster of controversial CEO Travis Kalanick as investors prepared the ride sharing giant for its IPO earlier this year.
Although Masa Son has long been a primary backer of Neumann and the company had committed to buying around $1 billion of We stock in the IPO, the Softbank chief is now in favour of Neumann stepping aside, according to a report by CNBC. Softbank led the two most recent investment rounds for the We Company.
Need for Cash, Threat of Legal Action, Could Compel Management Change
While Neumann’s voting control of the company enables him to resist any proposals for his ouster, the We Company’s need for cash, most of which has come from Softbank so far, may force the tequila-loving entrepreneur to strike a deal as analysts predict that, without fresh funding, the co-working titan may run out of money next year.
Beyond the We Company’s financial constraints, the company’s investors have other weapons in their quest to salvage the drive toward a public listing for the flexible office provider. The company’s backers have considered raising the threat of legal action, potentially focused on Neumann’s use of company resources for his own benefit, as well as investigating his potential use of drugs in the workplace, according to the Journal report.
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Beyond his high-flying personal habits, Neumann’s conduct as WeWork’s CEO has remained an issue even after he agreed to unwind a deal under which he had sold the company the trademarks for the We Company for a reported $5.9 million. Neumann, who has already taken more than $700 million out of the company through sales of shares and loans against his shares has also been criticised for having invested in properties which were later leased by WeWork.
To add to the sense of distress at the We Company, it was reported last week that Wendy Silverstein, the chief investment officer of a fund set up in May to purchase the properties which Neumann had leased to WeWork, had resigned from the We Company asset management venture. In the same week, former CBRE executive Sarah Pontius was reported to have agreed to leave her role as global head of real estate partnerships at the We Company.
In the weeks leading up to the We Company’s decision to postpone its IPO, the startup’s head of business and financial operations Ted Stedem, chief brand officer Julie Rice, and chief communications officer Jennifer Skyler all left the company.