Adam Neumann, the Israeli-born co-founder of co-working space giant WeWork (We Company) is stepping down as the company’s CEO amid allegations of misbehaviors, including self-dealings, ahead of an expected IPO (initial public offering).
Neumann will continue to serve as non-executive chairman of the board. In a statement released on Tuesday, Neumann said, “As co-founder of WeWork, I am so proud of this team and the incredible company.”
“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.”
The move came less than a week after the Wall Street Journal published a report detailing alleged strange behaviors on the part of Neumann and speculations that the company’s biggest investor, SoftBank, was looking to move him out of a leadership role. Other investors also criticized WeWork’s governance, business model, and its ability to be profitable.
Earlier this year, WeWork was valued at $47 billion and an IPO initially expected last week was postponed after it was estimated that the IPO valuation was a third of that sum – a sharp drop that made investors shaky.
They were also “dismayed by the number of potential conflicts of interest” disclosed in the IPO prospectus, WSJ reported, including Neumann “leasing properties he owns back to the company and borrowing heavily against his stock.”
“Even some of We’s private investors said they were angered to learn that an entity Mr. Neumann controls sold the rights to the word ‘We’ to the company for almost $6 million – before public pressure led him to unwind the deal,” according to the report.
Neumann, the Wall Street Journal wrote, led WeWork “with unusual exuberance and excess,” combining “entrepreneurial vision, personal charisma and brash risk-taking [that] helped the company surpass $2 billion in annual revenue, and made it the country’s most valuable startup.”
(Neumann was named among Time Magazine’s 100 most influential people last year.)
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“Now many of the same qualities that helped fuel his company’s breakneck growth in the private market are piling up as potential liabilities as the company prepares to go public – helmed by a CEO who looks little like a typical public-company chief,” according to the report.
Neumann founded WeWork in 2010 in New York alongside Miguel McKelvey. The company grew quickly, conquering shared workspaces worldwide in under a decade with now more than 500,000 members in 100 cities across 29 countries. One of its first international locations was Tel Aviv, where it now has seven sites. WeWork also works with enterprise customers (members with over 1,000 employees) and Fortune 500 companies, including major ones such as Microsoft, Facebook, Adidas, and Salesforce.
In 2016, the company embarked on a series of initiatives meant to encourage collaborative experiences starting with WeLive, an urban co-living community that provides furnished apartments, communal spaces and shared amenities, in New York City and Arlington, Virginia, with plans for Tel Aviv as well. Next came Rise by We, a wellness club and “superspa” also in the Big Apple, that builds on the “We” concept of communal experiences, launched in 2017.
That same year, WeWork launched a private children’s school — WeGrow — for “conscientious entrepreneurs” led by Neumann’s wife Rebekah Neumann. It also branched into vocational education as well, having bought New York’s Flatiron School, which offers a coding bootcamp as well as a number of free and certificate courses.
According to TechCrunch, Rebekah Neumann is said to have stepped down from her role as well.
Transitioning Neumann out of his CEO seat would allow him to “stay at the company he built into one of the country’s most valuable startups, but inject fresh leadership to pursue an IPO that would bring We the cash it needs to keep up its torrid growth,” according to another Wall Street Journal report.
WeWork’s Artie Minson, formerly co-president and chief financial officer, and Sebastian Gunningham, formerly vice-chairman, have been named co-CEOs of the company in Neumann’s stead.