WeWork’s co-founder and chief executive officer Adam Neumann has stepped down as CEO and will serve as non-executive chairman of the board, the company confirmed in a press release Tuesday following a report from The Wall Street Journal. WeWork’s vice chairman Sebastian Gunningham and the company’s president and chief operating officer Artie Minson will serve as co-CEOs.
The eclectic executive has faced increasing pressure to relinquish his throne after another report from the WSJ highlighted his drug use and desires to become Israel’s prime minister, among other strange behaviors.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement. “Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. 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. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”
Neumann’s wife and WeWork co-founder Rebekah Neumann is said to have stepped down from her role as well. Rebekah has had several titles over the years, including chief impact officer, chief brand officer and most recently, co-founder and CEO of WeGrow, WeWork’s “conscious entrepreneurial school.”
SoftBank, the Japanese investor that has funneled billions into the star co-working business, is said to have encouraged — rather, enforced — Neumann’s reported transition out of the CEO role ahead of the company’s anticipated initial public offering. Per the WSJ, moving to the chairman seat would “allow [Neumann] 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.”
WeWork revealed its unusual IPO prospectus last month after raising more than $8 billion in equity and debt funding. The New York-based company had been valued at a whopping $47 billion, thanks largely to SoftBank’s repeated investments despite financials that show losses of nearly $1 billion in the six months ending June 30.
Wall Street investors were skeptical of the eye-popping valuation, leading to reports WeWork would seek a valuation of as low as $15 billion instead, a magnificent defeat for one of the most valuable private companies in the world. Ultimately, WeWork delayed its float altogether, claiming it planned to go public “by the end of the year.”
In additional efforts to appease Wall Street, WeWork amended its S-1 filing to include the appointment of an independent lead director and its first female board member, Frances Frei. On top of that, the company decreased the strength of Class B and Class C shares so Neumann would not have 20 times the voting power of other shareholders, and removed Neumann’s wife from succession planning at the company.
According to the latest news, Neumann’s voting shares will be reduced from 10:1 to 3:1.
Meanwhile, WeWork is working with bankers to reduce the cost of its money-losing operation, with a new report from The Information stating the business may cut as many as 5,000 roles, or one-third of its entire workforce.
The WeWork IPO saga draws many parallels to Uber’s pre-IPO struggles. Both companies were led, for years, by outspoken executives, Neumann and Travis Kalanick, respectively. Both men were ousted, in essence, by frustrated board members who were concerned at the potential outcome of multi-billion-dollar IPOs.
Given WeWork’s struggle to complete a public listing and Uber’s disappointing performance on the public markets, perhaps private market investors will realize Silicon Valley’s pixie dust doesn’t carry the same weight on Wall Street.